NTWK 10-K & 10-Q changes, risk factors and insider trading

DespiteAccording ato recentPakistan generalNetwork, election,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 unstable.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.

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.

We continue to pursue a series of strategic marketing and business development initiatives to capitalize on favorablestrengthen market conditions presence and drivesupport 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 campaigns focused on content marketing; leveraging analytics and marketing automation tools to improve campaign effectiveness and optimize marketing 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.

MATERIALIndustry TRENDStrends AFFECTINGaffecting NETSOLour business

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,stock-based software development costs,compensation, and goodwill.

The Company’s contracts which contain multiple performance obligations generally consist of the initial purchase of subscriptionsubscriptions 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-alonestandalone 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 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.

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. InFor fixedfixed-fee feeimplementation arrangements,and customization services that are satisfied over time, revenue is recognized asusing services arean performedinput asmethod measuredbased byon costsperson-days incurred to date, comparedrelative to total estimated costsperson-days required to complete the services project.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.

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 overtimeover time on a monthly basis.

MoreDue 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 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 stand-alonestandalone 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 inputsjudgments and estimates involved in the Company’s revenue recognition policies are: The (1) stand-alonedetermining standalone selling prices of the Company’s software license,licenses, and (2) themeasuring methodprogress toward satisfaction of recognizingperformance revenueobligations for implementation, installation/customization, and other services.

The stand-alonestandalone selling price of the licenses wasis measured primarily through an analysis of pricing that management evaluatedevaluates 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-alonestandalone 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 separateseparately 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-daysperson-days” that 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-daysperson-days required to complete implementation and customization services each reporting period.

If a group of agreements areis 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 comprisecomprises 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 theit entityexpects willto be entitled in exchange for transferring the promised goods or services to a customer. When estimating variable consideration, the Company will considerconsiders all relevant facts and circumstances. Variable consideration will be estimated andis included in the contracttransaction price only whento the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.occur when the uncertainty associated with the variable consideration is subsequently resolved.

The timing of revenue recognition may differ from the timing of invoicing to customerscustomers, and these timing differences result in receivables, contract assets (revenues in excess of billings),assets, or contract liabilities (unearned revenue) on the Company’s Consolidated Balance Sheets. The Company records revenuescontract in excess of billingsassets when the Company has transferred goods or services but does not yet have the right to consideration. The Company records unearnedcontract revenue liabilities when the Company has received or has the right to receive consideration but has not yet transferred goods or services to the customer.

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 licenselicenses and services starting in future periods are included in accounts receivable and unearnedcontract revenue.liabilities.

Subscription and support fees for the year ended June 30, 2025,2026, were $32,934,648$35,799,842 compared to $27,952,768$32,934,648 for the year ended June 30, 20242025 reflecting an increase of $4,981,880$2,865,194 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.$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 NFS AscentTranscend®.

Services income for the year ended June 30, 2025,2026, was $32,554,948$33,617,160 compared to $27,990,332$32,554,948 for the year ended June 30, 2024,2025, reflecting an increase of $4,564,616$1,062,212 with an increase in constant currency of $4,160,167.$599,717. The increase is mainly due to implementation services in APAC, the U.S.APAC and Europe.

Salaries and consultant fees increaseddecreased by $2,174,558$100,129 from $23,622,907$25,797,465 for the year ended June 30, 2024,2025, to $25,797,465$25,697,336 for the year ended June 30, 30, 2025,2026, and on a constant currency basis increaseddecreased by $1,869,462.$227,030. The increasedecrease is due to capitalization of software development costs off set by annual increases in salary. As a percentage of sales, salaries and consultant expense increaseddecreased from 38.5%39.0% for the year ended June 30, 2025, to 34.6% for the year ended June 30, 2024, to 39.0% for the year ended June 30, 2025.2026.

Travel decreasedincreased by $879,931$746,181 from $2,943,442 for the year ended June 30, 2024, to $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 decreasedincreased by $901,699.$731,534. The decreaseincrease in travel expense is due to the decreaseincrease in travel for the current implementations. As a percentage of sales, travel expense decreasedincreased from 4.8%3.1% for year ended June 30, 2024,2025, to 3.1%3.8% for the year ended June 30, 2025.2026.

Operating expenses were $29,072,814$32,200,678 for the year ended June 30, 2026, compared to $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$3,127,864 and on a constant currency basis an increase of $3,452,110.$2,792,086. As a percentage of sales, it increaseddecreased from 42.0%44.0% to 44.0%.43.3%. The increase in operating expenses was primarily due to increases in selling expenses, general and administrative expenses andoffset by a decrease in research and development costs.

General and administrative expenses were $17,501,610$19,431,136 for the year ended June 30, 2025,2026, compared to $16,836,339$17,501,610 at June 30, 2024,2025, or an increase of $665,271,$1,929,526, and on a constant currency basis an increase of $992,703.$1,761,860. During the year ended June 30, 2025,2026, salaries increased by approximately approximately $687,000$2,058,745 or increased by approximately $574,000$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 increaseddecreased by approximately $496,000 $165,930 and on a constant currency basis increaseddecreased by approximately $477,000.$177,581. Other general and administrative costs decreasedincreased by approximately $36,711 $518,000 and on a constant currency basis a decrease of approximately $58,000.$16,227.

Income/Loss 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, compared to $3,493,555 for the year ended June 30, 2024.2025. This represents a slightan increase of $8,163$3,444,947 with aan decreaseincrease of $274,727$2,854,410 on a constant currency basis for the year ended June 30, 2025,2026, compared with the year ended June 30, 2024.2025. 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, compared to 5.7% for the year ended June 30, 2024.2025.

As of the date of this Quarterly Report on Form 10-Q, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended June 30, 2025, filed with the SEC on September 29, 2025, or our Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, filed with the SEC on November 12, 2025. Any of such factors could result in a significant or material adverse effect on our resultresults of operations or financial conditions. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.

The following discussion is intended to assist in an understanding of the Company’s financial position and results of operations for the three months ended DecemberMarch 31, 2025.2026. The following discussion should be read in conjunction with the information included within our our Annual Report on Form 10-K for the year ended June 30, 2025, and the Condensed Consolidated Financial Statements and notes thereto included included elsewhere in this Quarterly Report on Form 10-Q.

Our website is located at https://netsoltech.com/, and our investor relations website is located at https://ir.netsoltech.com. The following filings are available through our investor relations website after we file with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders. These filings are also available for download free of charge on our investor relations website. We also provide a link to the section of the SEC’s website at www.sec.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 relatedownership-related filings. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330.

FoundedNetSol in 1997, NetSol is headquartered in Encino, California. While theThe Company follows a global strategy for sales and delivery of its portfolio of solutions and services, it continues to maintainmaintains regional offices in the following locations:

PRODUCTSTranscend™ AND SERVICES: TRANSCEND™ PLATFORMPlatform

Transcend™ Retail (Formerly Known as Otoz®)

Transcend™ Finance (Formerly Known as Ascent®)

Transcend™ Marketplace (Formerly Known as Appex Now)