NETSOL TECHNOLOGIES INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion is intended to assist in an understanding of the Company’s financial position and results of operations for the three months ended March 31, 2025. The following discussion should be read in conjunction with the information included within our Annual Report on Form 10-K for the year ended June 30, 2024, and the Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. Our website is located at https://netsoltech.com/ , and our investor relations website is located at https://ir.netsoltech.com . The following filings are available through our investor relations website after we file with the SEC: Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and our Proxy Statements for our annual meetings of stockholders. These filings are also available for download free of charge on our investor relations website. We also provide a link to the section of the SEC’s website at www.sec.gov that has all of our public filings, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, all amendments to those reports, our Proxy Statements and other ownership related filings. Further, a copy of this Quarterly Report on Form 10-Q is located at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330. We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website. Additionally, we provide notifications of news or announcements regarding our financial performance, including SEC filings, investor events, press and earnings releases, and blogs as part of our investor relations website and on social media platforms linked to our corporate website. Investors and others can receive notifications of new information posted on our investor relations website by signing up for e-mail alerts. Further corporate governance information, including our committee charters and code of conduct, is also available on our investor relations website at https://ir.netsoltech.com/all-sec-filings . The content of our websites is not intended to be incorporated by reference into this or in any other report or document we file with the SEC, and any references to our websites are intended to be inactive textual references only. Forward-Looking Information This report contains certain forward-looking statements and information relating to the Company that is based on the beliefs of its management as well as assumptions made by and information currently available to its management. When used in this report, the words “anticipate”, “believe”, “estimate”, “expect”, “intend”, “plan”, and similar expressions as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management’s current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. The Company’s realization of its business aims could be materially and adversely affected by any technical or other problems in, or difficulties with, planned funding and technologies, third party technologies which render the Company’s technologies obsolete, the unavailability of required third party technology licenses on commercially reasonable terms, the loss of key research and development personnel, the inability or failure to recruit and retain qualified research and development personnel, or the adoption of technology standards which are different from technologies around which the Company’s business ultimately is built. The Company does not intend to update these forward-looking statements. Page 33 Business Overview NetSol Technologies is a global business services and asset finance solutions provider. NetSol delivers state-of-the-art solutions for the asset finance and leasing industry, serving automotive and equipment OEMs, auto captives and financial institutions across over 30 countries. Since its inception in 1997, NetSol has been at the cutting edge of technology, pioneering innovations with its asset finance solutions and leveraging advanced AI and cloud services to meet the complex needs of the global market. Renowned for a deep industry expertise, customer-centric approach and commitment to excellence, NetSol seeks to foster strong partnerships with its clients, ensuring their success in an ever-evolving landscape. With a rich history of innovation, ethical business practices and a focus on sustainability, NetSol is dedicated to empowering businesses worldwide, securing its position as the trusted partner for leading firms around the globe. Our primary sources of revenues have been licensing, subscriptions, modification, enhancement and support of our suite of financial applications, under the brand name Transcend™ Finance (formerly called NFS Ascent ® ) for leading businesses in the global finance and leasing space. Our clients include blue chip organizations, Dow-Jones 30 Industrials, Fortune 500 manufacturers, financial institutions, global vehicle manufacturers and enterprise technology providers, all of which are serviced by our strategically placed support and delivery locations around the globe. We are also committed to serving Tier-2 and Tier-3 banks and financial institutions. We understand the unique challenges faced by these institutions, which is why we offer innovative cloud implementation solutions without any license fees, with rapid deployments and with the ability to scale. Further, our out-of-the-box, API-first products are designed to seamlessly integrate into existing systems, providing flexibility and scalability that smaller institutions often need. By prioritizing accessibility and ease of use, we empower smaller financial companies to enhance their service offerings and streamline operations, positioning ourselves as a trusted partner in their digital transformation journey. Founded in 1997, NetSol is headquartered in Encino, California. While the Company follows a global strategy for sales and delivery of its portfolio of solutions and services, it continues to maintain regional offices in the following locations: ● North America Encino, California and Austin, Texas ● Europe London Metropolitan area, Horsham and Flintshire ● Asia Pacific Lahore, Karachi, Bangkok, Beijing, Tianjin, Jakarta and Sydney ● Middle East Dubai We believe that our strong technology solutions offer our customers a return on their investment and allows us to thrive in a hyper competitive and mature global marketplace. Our solutions are bolstered by our people. We believe that people are the drivers of success; therefore, we invest heavily in our hiring, training and retention of top-notch staff to ensure not only successful selling, but also the ongoing satisfaction of our clients. Taken together, this “selling and attentive servicing” approach creates a distinctive advantage for us and a unique value for our customers. We continue to underpin our proven and effective business model which is a combination of careful cost arbitrage, subject matter expertise, domain experience, scalability and proximity with our global and regional customers. Expertise Our expertise in enterprise technology and financial application development has helped us emerge as a global player in the finance and leasing industry and enabled us to secure a broad footprint across the major markets of North America, Asia Pacific and Europe. The Asia Pacific region has particularly benefitted from the organic growth in the fast-developing leasing automation industry, which is still nascent as per Western standards. Page 34 Domain Experience NetSol is a dynamic leader and has been able to accumulate a wealth of experience in the global asset finance and leasing industry. We have built a large knowledge base which is regularly refined and updated to ensure the most up-to-date best practices and business solutions for the benefit of our clients and partners. We have a strong presence in the captive asset-finance domain. We have had continual operations for nearly three decades in Asia Pacific and Europe and over four decades in North America. Proximity with Global and Regional Customers We have offices across the world, located strategically to maintain close contact and proximity with our customers in various key markets. This has not only helped us strengthen our customer relationships, but also build a deeper understanding of local market dynamics. Simultaneously, we can extend services and support development through a combination of onsite and offsite resources. This approach has allowed us to offer blended rates to our customers by employing a unique and cost-effective global development model. While our business model is built around the development, implementation and maintenance of our suite of financial applications, we employ the same facilities and competencies to extend our services to related segments, including but not limited to: ● Information security ● Digital solutions ● AI, ML and data analytics ● Generative AI ● Policy and strategy ● Emerging technologies| ● Cloud services ● Data engineering Our global operations are broken down into three primary regions: North America, Europe and Asia Pacific. All of the subsidiaries are seamlessly integrated to function effectively with global delivery capabilities, cross selling to multinational asset finance companies, leveraging the centralized marketing and pre-sales organization, and a network of employees connected across the globe to support local and global customers and partners. OUR PRODUCTS AND SERVICES Covering the complete finance and leasing lifecycle starting from quotation origination through contract settlements, our products are designed and developed for highly flexible settings and are capable of dealing with multinational, multi-company, multi-asset, multi-lingual, multi-distributor and multi-manufacturer environments. Our solutions empower financial institutions to effectively manage their complex lending portfolios, enabling them to thrive in hyper-competitive global markets. Built on cutting-edge, modern technology, NetSol’s unified Transcend™ Platform is an AI-powered digital retail and asset finance solution for automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions. PRODUCTS AND SERVICES: TRANSCEND™ PLATFORM The Transcend™ Platform, powered by NetSol, is an AI-driven unified ecosystem that revolutionizes how assets are sold, financed and leased. Designed to automate and optimize every step - from sales to originations to servicing, Transcend™ leverages AI and ML to drive predictive insights and smarter decision-making. Page 35 Transcend™ Retail (Formerly Known as Otoz®) We revolutionize auto and equipment retail with a fully digital, integrated platform that simplifies the entire customer journey. From online purchasing to finance approval, Transcend™ Retail (formerly known as Otoz®) offers advanced retail and mobility solutions that keep dealerships or OEMs at the cutting edge of consumer expectations. Transcend™ Finance (Formerly Known as Ascent®) We streamline finance and leasing operations with a comprehensive solution for originations, servicing and wholesale finance. Transcend™ Finance (formerly known as Ascent®) empowers automotive and equipment OEMs, auto captives, commercial lenders, dealers, brokers and financial institutions with end-to-end visibility and control, ensuring seamless workflows and accelerated business outcomes. Originations We streamline the entire origination process, from submission to approval, with advanced features such as real-time, AI-powered credit decisioning, automated deal flows and more. Servicing We enable financial institutions to attain real-time insights into portfolio performance, delinquencies and losses, enabling proactive portfolio management and strategic decision-making. Wholesale finance Our wholesale finance solution empowers customers to gain a competitive edge by automating their wholesale finance and floor planning operations effortlessly. Transcend™ Marketplace (Formerly Known as Appex Now) Transcend™ Marketplace (formerly known as Appex Now) offers a suite of flexible, component-based solutions that integrate seamlessly with the customer’s existing infrastructure. Transcend™ Marketplace is a modular, API-first solution that addresses every aspect of finance and leasing using tools for calculations, document generation, loan origination and lending configurations. Flex™ Flex is an API-first, ready-to-use calculation and quotation engine. It is a one-stop solution that guarantees precise calculations at all stages of the contract lifecycle through various calculation types. All the calculations are parameter-driven, which helps perform simple, multi-dimensional or complex calculations based on the needs of a business. Flex™ has a lightning-fast onboarding process, which can take place in mere minutes. Hubex™ Hubex™ is an API library that enables companies to standardize all their API integration procedures across multiple API services through a single integration. In addition to traditional lending companies, Hubex™ can also streamline the operations of dealerships, vendors and consultants. With a ready-to-use service, Hubex™ makes it easy for businesses to seamlessly connect with multiple APIs and achieve their desired outcomes. Pre-integrated services in the Hubex™ library include, but are not limited to, payment processing, bank account authentication, finance and insurance products, fraud check, know your customer (KYC) service, driver license verification, address validation, vehicle valuation and notification service. Index™ Index™ is a cloud-based parameter storage that smoothly runs all of a company’s core lending operations. It is an accumulation of all the master setups, including asset catalog and inventory, programs, rates, and profiles for lenders, dealers and multiple partners, in one centralized location for all business types. Index TM can enhance delivery efficiency and program management for easy integration into all systems. Dock™ Dock™ is an advanced document generation tool that lets a company create accurate and professional-looking documents in just seconds. With Dock TM ’s template-based configuration, a company can set up placeholders for data, essentially simplifying the document creation process and reducing the chance of human error. Its API-first architecture ensures scalability, making it capable of handling any document generation task, from single documents to millions, with ease. Page 36 Lane™ Lane™ offers a feature-rich, end-to-end order management system for asset leasing and loans and credit companies. Our platform covers all aspects, from conducting end-to-end sales to performing dealer and partner-related tasks and marketing-related activities. The system offers a variety of dashboards that provide vital information for dealers and partners while enabling quick order management and providing a way for users to record and submit a complete credit application for their clients. Link™ Link is a purpose-built platform designed for brokers, lenders, dealers and borrowers to work seamlessly together. With tailored solutions that simplify applications and automate key processes, Link TM is designed to enhance customer relationships whilst making compliance effortless. This results in faster approvals, enriched customer experiences and stronger loyalty via elevated customer satisfaction. Intermediary portals: Broker portals Efficiency and effectiveness are paramount for any broker. Managing disparate systems and processes can be cumbersome and time consuming, often leading to inefficiencies and missed opportunities. NetSol offers a solution to these challenges by consolidating disparate processes into a single unified interface, revolutionizing the way a brokerage operates. Lender portals NetSol’s lender-specific portals are designed to transform the lending process by enhancing risk management and driving profitability. Our advanced tools not only streamline loan origination, but also facilitate seamless communication and collaboration with the lending ecosystem. We empower a company’s lending process with intuitive and efficient lender portals designed for a seamless user experience. Dealer portals In the competitive automotive industry, dealers need efficient and comprehensive solutions to manage their operations effectively. NetSol’s intermediary portals serve as digital command centers, providing dealers with a wide array of tools, resources and services to optimize every aspect of their business, from inventory management to sales and marketing. Transcend™ Consultancy Empowering businesses with Transcend™ Consulting Services, we offer expert guidance across critical areas like information security, data engineering and cloud services. Our team partners with businesses to create tailored solutions that drive innovation, efficiency and growth. Transcend™ AI Labs We are leading AI-driven innovation with our Transcend™ AI Labs, integrating advanced AI services into our product suite to solve the unique challenges of BFSI, equipment and auto OEMs and dealerships. Our tailored solutions drive industry-specific advancements, helping companies stay ahead in a competitive market. Page 37 Highlights Listed below are a few of NetSol’s highlights for the quarter ended March 31, 2025: ● We entered into an agreement with a Chinese leasing company to deploy our Transcend Finance Suite, including Omni POS, Contract Management System, and a customized funding platform compliant with local regulations. The contract is expected to generate approximately $2.7 million in revenues during the contract term. ● We partnered with Sindbad Management SPC to implement Transcend Finance Platform (Point-of-Sale, Credit Underwriting, Contract Management) under a scalable pricing model, supporting high-value asset financing and regional growth. The contract is expected to generate $1.7 million in revenues during the contract term. ● We generated $1.1 million through modifications and system enhancements for multiple clients across diverse regions. ● We secured $1 million in additional revenue for the ongoing Transcend Retail Platform implementation for a U.S. auto manufacturer, driven by customizations to meet their evolving business needs. ● We amended an agreement with an existing UK/EU client that will provide additional revenue of €3 million, further strengthening the long-term partnership. ● We hired a Vice President of Artificial Intelligence, who has 15+ years in fintech, insurance, and entertainment, to lead Transcend AI Labs, accelerating our AI-first strategy in asset finance. ● We announced the go-live of our Transcend Finance platform for the Australian operations of a leading Japanese equipment finance company, building on our existing partnership in New Zealand and enhancing their regional operations with additional digital self-service solutions. Management has identified the following material trends affecting NetSol. Positive trends: ● According to S&P Global Mobility, the forecast for new vehicle sales worldwide in 2025 is 89.6 million units, which is a modest 1.7% year-over-year growth in light vehicle sales. ● According to S&P Global Mobility and Edmunds, the US automotive sales of new vehicles in 2025 are expected to be around 16.2 million units, which is a 1.2% to 1.4% increase from 2024. This would be the highest annual sales figure since 2019. ● The annual inflation rate for the U.S. was 2.4% for the 12 months ending March 2025. (USinflationcalculator.com) ● The U.S. market remains strong and resilient for NetSol to continue investing in building local teams for its core offerings. ● According to recent forecasts, China’s auto sales in 2025 are expected to reach approximately 32.9 million units representing a 4.7% year-over-year increase. (China Automobile Manufacturers Association) ● The China Pakistan Economic Corridor (CPEC) investment, initiated by China, has exceeded $65 billion from the originally planned $46 billion, in Pakistan’s energy and infrastructure sectors. In June 2024, China authorized a new $2.3 billion loan at a discounted rate to Pakistan as a short-term loan. ● The overall size of the mobility market in Europe and the United States is projected to increase over $425 billion combined, by 2035 or a compound CAGR of 5% from 2022. (Deloitte Global Automotive Mobility Market Simulation Tool) ● The global automotive finance market accounted for $245 billion in 2022 and is expected to more than double by 2035 at a CAGR of 7.4% according to Precedence Research. Page 38 Negative trends: ● The conflict in Gaza has disrupted the entire Middle East region since October 7, 2023. The conflict has expanded to neighboring nations such as Syria, Lebanon and Iran. The unrest and turmoil in the region is viewed unfavorably by the regional business community. ● 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. ● The imposition of tariffs on China and threatened tariffs on other US trading partners may affect the price of consumer goods including vehicles amongst others, negatively affecting the profitability of many of our customers. ● Political, monetary, and economic challenges and a higher inflation rate than other regional countries impacting Pakistan exports. ● Inflation and higher interest rates globally have greatly increased the cost of doing business, including salaries and benefits worldwide, affecting profitability. ● War and hostility between Russia and Ukraine continue to foster global economic uncertainty. ● The geo-political environment in South Asia will continue to influence Pakistan’s economic prospects. Pakistan’s political uncertainty has caused higher inflation with constant pressure on its currency being devalued against the US Dollar. According to a report issued by the World Bank, while marginal economic growth is expected in Pakistan, implementing an ambitious and credibly communicated economic reform plan is critical for a robust economic recovery. There is no guarantee that such reforms will be implemented. See Press Release, dated April 2, 2024, World Bank. ● The US and EU have placed tariffs on a range of high-tech products from China including the US placing 100% tariffs on EV vehicles and 25% tariffs on EV batteries imported from China. (Center for Strategic and International Studies June 28, 2024). The US imposed additional tariffs on China in February 2025 with retaliatory tariffs from China on US goods. Page 39 CHANGES IN FINANCIAL CONDITION Quarter Ended March 31, 2025 Compared to the Quarter Ended March 31, 2024 The following table sets forth the items in our unaudited condensed consolidated statement of operations for the three months ended March 31, 2025 and 2024 as a percentage of revenues. For the Three Months Ended March 31, 2025 % 2024 % Net Revenues: License fees $ 1,198 0.0 % $ 558,340 3.6 % Subscription and support 7,888,360 45.0 % 7,140,358 46.2 % Services 9,654,399 55.0 % 7,765,818 50.2 % Total net revenues 17,543,957 100.0 % 15,464,516 100.0 % Cost of revenues 8,802,184 50.2 % 7,989,696 51.7 % Gross profit 8,741,773 49.8 % 7,474,820 48.3 % Operating expenses: Selling, general and administrative 6,883,587 39.2 % 5,811,335 37.6 % Research and development cost 304,788 1.7 % 345,582 2.2 % Total operating expenses 7,188,375 41.0 % 6,156,917 39.8 % Income (loss) from operations 1,553,398 8.9 % 1,317,903 8.5 % Other income and (expenses) Interest expense (194,742 ) -1.1 % (289,677 ) -1.9 % Interest income 294,655 1.7 % 376,466 2.4 % Gain (loss) on foreign currency exchange transactions 321,622 1.8 % (963,887 ) -6.2 % Other income 10,831 0.1 % 21,634 0.1 % Total other income (expenses) 432,366 2.5 % (855,464 ) -5.5 % Net income before income taxes 1,985,764 11.3 % 462,439 3.0 % Income tax provision (151,334 ) -0.9 % (146,569 ) -0.9 % Net income 1,834,430 10.5 % 315,870 2.0 % Non-controlling interest (410,462 ) -2.3 % 11,679 0.1 % Net income attributable to NetSol $ 1,423,968 8.1 % $ 327,549 2.1 % Net income per share: Net income per common share Basic $ 0.12 $ 0.03 Diluted $ 0.12 $ 0.03 Weighted average number of shares outstanding Basic 11,683,408 11,390,888 Diluted 11,683,408 11,430,493 Page 40 A significant portion of our business is conducted in currencies other than the U.S. dollar. We operate in several geographical regions as described in Note 15 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening of the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues but also increasing our expenses denominated in currencies other than the U.S. dollar. Similarly, strengthening of the U.S. dollar compared to foreign currency exchange rates generally has the effect of reducing our revenues but also reducing our expenses denominated in currencies other than the U.S. dollar. We plan our business accordingly by deploying additional resources to areas of expansion, while continuing to monitor our overall expenditures given the economic uncertainties of our target markets. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the changes in results from one period to another period using constant currency. In order to calculate our constant currency results, we apply the current period results to the prior period foreign currency exchange rates. In the table below, we present the change based on actual results in reported currency and in constant currency. Favorable Favorable Total (Unfavorable) (Unfavorable) Favorable For the Three Months Change in Change due to (Unfavorable) Ended March 31, Constant Currency Change as 2025 % 2024 % Currency Fluctuation Reported Net Revenues: $ 17,543,957 100.0 % $ 15,464,516 100.0 % $ 2,097,892 $ (18,451 ) $ 2,079,441 Cost of revenues: 8,802,184 50.2 % 7,989,696 51.7 % (829,393 ) 16,905 (812,488 ) Gross profit 8,741,773 49.8 % 7,474,820 48.3 % 1,268,499 (1,546 ) 1,266,953 Operating expenses: 7,188,375 41.0 % 6,156,917 39.8 % (1,038,277 ) 6,819 (1,031,458 ) Income (loss) from operations $ 1,553,398 8.9 % $ 1,317,903 8.5 % $ 230,222 $ 5,273 $ 235,495 Net revenues for the three months ended March 31, 2025 and 2024 are broken out among the segments as follows: 2025 2024 Revenue % Revenue % North America $ 3,869,903 22.1 % $ 1,365,074 8.8 % Europe 5,895,140 33.6 % 3,045,784 19.7 % Asia-Pacific 7,778,914 44.3 % 11,053,658 71.5 % Total $ 17,543,957 100.0 % $ 15,464,516 100.0 % Revenues License fees License fees for the three months ended March 31, 2025 were $1,198 compared to $558,340 for the three months ended March 31, 2024 reflecting a decrease of $557,142 with a decrease in constant currency of $557,142. During the three months ended March 31, 2024, we recognized approximately $465,000 related to the additional sale of our NFS Ascent® CMS software to a renowned German auto manufacturer based in China. Page 41 Subscription and support Subscription and support fees for the three months ended March 31, 2025 were $7,888,360 compared to $7,140,358 for the three months ended March 31, 2024 reflecting an increase of $748,002 with an increase in constant currency of $768,805. Subscription and support fees begin once a customer has “gone live” with our product. Subscription and support fees are recurring in nature, and we anticipate these fees to gradually increase as we implement both our NFS legacy products and NFS Ascent ® . Services Services income for the three months ended March 31, 2025 was $9,654,399 compared to $7,765,818 for the three months ended March 31, 2024 reflecting an increase of $1,888,581, with an increase in constant currency of $1,863,412. The increase is mainly due to implementation services in the U.S. and Europe. Gross Profit The gross profit was $8,741,773, for the three months ended March 31, 2025 compared with $7,474,820 for the three months ended March 31, 2024. This is an increase of $1,266,953 with an increase in constant currency of $1,268,499. The gross profit percentage for the three months ended March 31, 2025 also increased to 49.8% from 48.3% for the three months ended March 31, 2024. The cost of sales was $8,802,184 for the three months ended March 31, 2025 compared to $7,989,696 for the three months ended March 31, 2024 for an increase of $812,488 and on a constant currency basis an increase of $829,393. As a percentage of sales, cost of sales decreased from 51.7% for the three months ended March 31, 2024 to 50.2% for the three months ended March 31, 2025. Salaries and consultant fees increased by $968,018 from $5,803,910 for the three months ended March 31, 2024 to $6,771,928 for the three months ended March 31, 2025 and on a constant currency basis increased by $982,985. The increase is due to annual salary raises. As a percentage of sales, salaries and consultant expense increased from 37.5% for the three months ended March 31, 2024 to 38.6% for the three months ended March 31, 2025. Travel expenses were $451,895 for the three months ended March 31, 2025 compared to $799,560 for the three months ended March 31, 2024 for a decrease of $347,665 with a decrease in constant currency of $346,479. As a percentage of sales, travel expense decreased from 5.2% for the three months ended March 31, 2024 to 2.6% for the three months ended March 31, 2025. Depreciation and amortization expense decreased to $240,444 compared to $250,126 for the three months ended March 31, 2024 or a decrease of $9,682 and on a constant currency basis a decrease of $9,512. Other costs increased to $1,337,917 for the three months ended March 31, 2025 compared to $1,136,100 for the three months ended March 31, 2024 or an increase of $201,817 and on a constant currency basis an increase of $202,399. Operating Expenses Operating expenses were $7,188,375 for the three months ended March 31, 2025 compared to $6,156,917, for the three months ended March 31, 2024 for an increase of $1,031,458 and on a constant currency basis an increase of $1,038,277. As a percentage of sales, it increased from 39.8% to 41.0%. The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages and provision for doubtful accounts off set by decrease in other general and administrative expenses. Selling expenses were $2,426,083 for the three months ended March 31, 2025 compared to $1,830,025, for the three months ended March 31, 2024 for an increase of $596,058 and on a constant currency basis an increase of $585,484. The increase is mainly due to increases is salaries and consultants of approximately $427,000, due to annual raises and the hiring of additional marketing personnel. Other marketing expenses increased by approximately $130,000 due to the increase in advertising and marketing events. Page 42 General and administrative expenses were $4,457,504 for the three months ended March 31, 2025 compared to $3,981,310 for the three months ended March 31, 2024 or an increase of $476,194 and on a constant currency basis an increase of $493,629. During the three months ended March 31, 2025, salaries increased by $14,558 and increased $21,091 on a constant currency basis, bad debt expense increased $606,795 and increased $616,360 on a constant currency basis, and other general and administrative expenses decreased $145,149 and decreased by $143,822 on a constant currency basis. Research and development cost was $304,788 for the three months ended March 31, 2025 compared to $345,582, for the three months ended March 31, 2024 for a decrease of $40,794 and on a constant currency basis a decrease of $40,836. Income/Loss from Operations Income from operations was $1,553,398 for the three months ended March 31, 2025 compared to $1,317,903 for the three months ended March 31, 2024. This represents an increase of $235,495 with an increase of $230,222 on a constant currency basis for the three months ended March 31, 2025 compared with the three months ended March 31, 2024. As a percentage of sales, income from operations was 8.9% for the three months ended March 31, 2025 compared to 8.5% for the three months ended March 31, 2024. Other Income and Expense Other income was $432,366 for the three months ended March 31, 2025 compared to other expense of $855,464 for the three months ended March 31, 2024. This represents an increase in other income of $1,287,830 with an increase of $1,286,923 on a constant currency basis. The increase is primarily due to the foreign currency exchange transactions. The majority of the contracts with NetSol PK are either in U.S. dollars or Euros; therefore, the currency fluctuations will lead to foreign currency exchange gains or losses depending on the value of the PKR compared to the U.S. dollar and the Euro. During the three months ended March 31, 2025, we recognized a gain of $321,622 in foreign currency exchange transactions compared to a loss of $963,887 for the three months ended March 31, 2024. During the three months ended March 31, 2025, the value of the U.S. dollar increased 0.3% and the Euro increased 4.5%, compared to the PKR. During the three months ended March 31, 2024, the value of the U.S. dollar and the Euro decreased 0.6% and 2.8%, compared to the PKR. Non-controlling Interest For the three months ended March 31, 2025, the net income attributable to non-controlling interest was $410,462, compared to net income of $11,679 for the three months ended March 31, 2024. The increase in non-controlling interest is primarily due to the increase in net income of NetSol PK. Net income (loss) attributable to NetSol The net income was $1,423,968 for the three months ended March 31, 2025 compared to $327,549 for the three months ended March 31, 2024. This is an increase of $1,096,419 with an increase of $1,039,042 on a constant currency basis, compared to the prior year. For the three months ended March 31, 2025, net income per share was $0.12 for basic and diluted shares compared to net income per share of $0.03 for basic and diluted shares for the three months ended March 31, 2024. Page 43 Nine Months Ended March 31, 2025 Compared to the Nine Months Ended March 31, 2024 The following table sets forth the items in our unaudited condensed consolidated statement of operations for the nine months ended March 31, 2025 and 2024 as a percentage of revenues. For the Nine Months Ended March 31, 2025 % 2024 % Net Revenues: License fees $ 75,115 0.2 % $ 4,829,242 10.7 % Subscription and support 24,723,460 51.9 % 20,480,382 45.6 % Services 22,880,541 48.0 % 19,635,014 43.7 % Total net revenues 47,679,116 100.0 % 44,944,638 100.0 % Cost of revenues 25,452,890 53.4 % 24,132,064 53.7 % Gross profit 22,226,226 46.6 % 20,812,574 46.3 % Operating expenses: Selling, general and administrative 20,921,530 43.9 % 17,051,798 37.9 % Research and development cost 998,406 2.1 % 1,065,412 2.4 % Total operating expenses 21,919,936 46.0 % 18,117,210 40.3 % Income (loss) from operations 306,290 0.6 % 2,695,364 6.0 % Other income and (expenses) Interest expense (689,347 ) -1.4 % (856,016 ) -1.9 % Interest income 1,593,594 3.3 % 1,259,464 2.8 % Gain (loss) on foreign currency exchange transactions 165,775 0.3 % (1,112,757 ) -2.5 % Other income 202,386 0.4 % 22,210 0.0 % Total other income (expenses) 1,272,408 2.7 % (687,099 ) -1.5 % Net income before income taxes 1,578,698 3.3 % 2,008,265 4.5 % Income tax provision (712,765 ) -1.5 % (418,517 ) -0.9 % Net income 865,933 1.8 % 1,589,748 3.5 % Non-controlling interest (518,212 ) -1.1 % (822,993 ) -1.8 % Net income attributable to NetSol $ 347,721 0.7 % $ 766,755 1.7 % Net income per share: Net income per common share Basic $ 0.03 $ 0.07 Diluted $ 0.03 $ 0.07 Weighted average number of shares outstanding Basic 11,531,365 11,369,778 Diluted 11,531,365 11,409,383 Page 44 A significant portion of our business is conducted in currencies other than the U.S. dollar. We operate in several geographical regions as described in Note 15 “Operating Segments” within the Notes to the Condensed Consolidated Financial Statements. Weakening of the value of the U.S. dollar compared to foreign currency exchange rates generally has the effect of increasing our revenues but also increasing our expenses denominated in currencies other than the U.S. dollar. Similarly, strengthening of the U.S. dollar compared to foreign currency exchange rates generally has the effect of reducing our revenues but also reducing our expenses denominated in currencies other than the U.S. dollar. We plan our business accordingly by deploying additional resources to areas of expansion, while continuing to monitor our overall expenditures given the economic uncertainties of our target markets. In order to provide a framework for assessing how our underlying businesses performed excluding the effect of foreign currency fluctuations, we compare the changes in results from one period to another period using constant currency. In order to calculate our constant currency results, we apply the current period results to the prior period foreign currency exchange rates. In the table below, we present the change based on actual results in reported currency and in constant currency. Favorable Favorable Total (Unfavorable) (Unfavorable) Favorable For the Nine Months Change in Change due to (Unfavorable) Ended March 31, Constant Currency Change as 2025 % 2024 % Currency Fluctuation Reported Net Revenues: $ 47,679,116 100.0 % $ 44,944,638 100.0 % $ 2,455,162 $ 279,316 $ 2,734,478 Cost of revenues: 25,452,890 53.4 % 24,132,064 53.7 % (938,612 ) (382,214 ) (1,320,826 ) Gross profit 22,226,226 46.6 % 20,812,574 46.3 % 1,516,550 (102,898 ) 1,413,652 Operating expenses: 21,919,936 46.0 % 18,117,210 40.3 % (3,473,618 ) (329,108 ) (3,802,726 ) Income (loss) from operations $ 306,290 0.6 % $ 2,695,364 6.0 % $ (1,957,068 ) $ (432,006 ) $ (2,389,074 ) Net revenues for the nine months ended March 31, 2025 and 2024 are broken out among the segments as follows: 2025 2024 Revenue % Revenue % North America $ 9,945,837 20.9 % $ 4,238,910 9.4 % Europe 11,651,606 24.4 % 8,080,174 18.0 % Asia-Pacific 26,081,673 54.7 % 32,625,554 72.6 % Total $ 47,679,116 100.0 % $ 44,944,638 100.0 % Revenues License fees License fees for the nine months ended March 31, 2025 were $75,115 compared to $4,829,242 for the nine months ended March 31, 2024 reflecting a decrease of $4,754,127 with a decrease in constant currency of $4,756,850. During the nine months ended March 31, 2024, we recognized approximately $2,800,000 related to the sale of our NFS Ascent® CMS software to a renowned U.S. auto manufacturer based in China and we recognized approximately $1,142,000 related to the license renewal with an existing customer, and we recognized approximately $465,000 related to the additional sale of our NFS Ascent® CMS software to a renowned German auto manufacturer based in China. Page 45 Subscription and support Subscription and support fees for the nine months ended March 31, 2025 were $24,723,460 compared to $20,480,382 for the nine months ended March 31, 2024 reflecting an increase of $4,243,078 with an increase in constant currency of $4,139,874. The increase includes a one-time catch up of approximately $1,693,000 from five of our customers. Subscription and support fees begin once a customer has “gone live” with our product. Subscription and support fees are recurring in nature, and we anticipate these fees to gradually increase as we implement both our NFS legacy products and NFS Ascent ® . Services Services income for the nine months ended March 31, 2025 was $22,880,541 compared to $19,635,014 for the nine months ended March 31, 2024 reflecting an increase of $3,245,527 with an increase in constant currency of $3,003,158. The increase is mainly due to implementation services in the U.S. and Europe. Gross Profit The gross profit was $22,226,226, for the nine months ended March 31, 2025 compared with $20,812,574 for the nine months ended March 31, 2024. This is an increase of $1,413,652 with an increase in constant currency of $1,516,550. The gross profit percentage for the nine months ended March 31, 2025 slightly increased to 46.6% from 46.3% for the nine months ended March 31, 2024. The cost of sales was $25,452,890 for the nine months ended March 31, 2025 compared to $24,132,064 for the nine months ended March 31, 2024 for an increase of $1,320,826 and on a constant currency basis an increase of $938,612. As a percentage of sales, cost of sales slightly decreased from 53.7% for the nine months ended March 31, 2024 to 53.4% for the nine months ended March 31, 2025. Salaries and consultant fees increased by $2,024,684 from $17,665,415 for the nine months ended March 31, 2024 to $19,690,099 for the nine months ended March 31, 2025 and on a constant currency basis increased by $1,732,630. The increase is due to annual salary raises. As a percentage of sales, salaries and consultant expense increased from 39.3% for the nine months ended March 31, 2024 to 41.3% for the nine months ended March 31, 2025. Travel expenses were $1,624,008 for the nine months ended March 31, 2025 compared to $2,207,999 for the nine months ended March 31, 2024 for a decrease of $583,991 with a decrease in constant currency of $606,561. As a percentage of sales, travel expense decreased from 4.9% for the nine months ended March 31, 2024 to 3.4% for the nine months ended March 31, 2025. Depreciation and amortization expense decreased to $706,876 compared to $907,483 for the nine months ended March 31, 2024 or a decrease of $200,607 and on a constant currency basis a decrease of $213,640. Other costs increased to $3,431,907 for the nine months ended March 31, 2025 compared to $3,351,167 for the nine months ended March 31, 2024 or an increase of $80,740 and on a constant currency basis an increase of $26,183. Operating Expenses Operating expenses were $21,919,936 for the nine months ended March 31, 2025 compared to $18,117,210, for the nine months ended March 31, 2024 for an increase of $3,802,726 and on a constant currency basis an increase of $3,473,618. As a percentage of sales, it increased from 40.3% to 46.0%. The increase in operating expenses was primarily due to increases in selling and marketing expenses, salaries and wages, provision for doubtful accounts, and other general and administrative expenses. Selling expenses were $7,380,679 for the nine months ended March 31, 2025 compared to $5,323,400, for the nine months ended March 31, 2024 for an increase of $2,057,279 and on a constant currency basis an increase of $1,952,658. The increase is mainly due to increases is salaries and consultants of approximately $1,447,000, due to annual raises and the hiring of additional marketing personnel. Travel expenses increased by approximately $274,000. Other marketing expenses increased by approximately $345,000 due to the increase in marketing events. Page 46 General and administrative expenses were $13,540,851 for the nine months ended March 31, 2025 compared to $11,728,398 for the nine months ended March 31, 2024 or an increase of $1,812,453 and on a constant currency basis, an increase of $1,608,601. During the nine months ended March 31, 2025, salaries increased by approximately $577,390 and increased $493,440 on a constant currency basis, bad debt expense increased $1,052,776 and $1,046,603 on a constant currency basis, and other general and administrative expenses increased approximately $182,287 or increased by $68,558 on a constant currency basis. Research and development cost was $998,406 for the nine months ended March 31, 2025 compared to $1,065,412, for the nine months ended March 31, 2024 for a decrease of $67,006 and on a constant currency basis, a decrease of $87,641. Income/Loss from Operations Income from operations was $306,290 for the nine months ended March 31, 2025 compared to $2,695,364 for the nine months ended March 31, 2024. This represents a decrease of $2,389,074 with a decrease of $1,957,068 on a constant currency basis for the nine months ended March 31, 2025 compared with the nine months ended March 31, 2024. As a percentage of sales, income from operations was 0.6% for the nine months ended March 31, 2025 compared to 6.0% for the nine months ended March 31, 2024. Other Income and Expense Other income was $1,272,408 for the nine months ended March 31, 2025 compared to other expense of $687,099 for the nine months ended March 31, 2024. This represents an increase in other income of $1,959,507 with an increase of $1,924,932 on a constant currency basis. The increase is primarily due to the foreign currency exchange transactions and interest income. 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 nine months ended March 31, 2025, we recognized a gain of $165,775 in foreign currency exchange transactions compared to a loss of $1,112,757 for the nine months ended March 31, 2024. During the nine months ended March 31, 2025, the value of the U.S. dollar increased 0.5% and the Euro increased 1.5%, compared to the PKR. During the nine months ended March 31, 2024, the value of the U.S. dollar and the Euro decreased 3.2% and 4.0%, respectively, compared to the PKR. During the nine months ended March 31, 2025, interest income was $1,593,594 compared to $1,259,464 for the nine months ended March 31, 2024, for an increase of $334,130 and on constant currency basis an increase of $291,791. The increase in interest income was driven by a higher balance of interest-bearing funds during the period. Non-controlling Interest For the nine months ended March 31, 2025, the net income attributable to non-controlling interest was $518,212, compared to $822,993 for the nine months ended March 31, 2024. The decrease in non-controlling interest is primarily due to the decrease in net income of NetSol PK. Net income (loss) attributable to NetSol The net income was $347,721 for the nine months ended March 31, 2025 compared to $766,755 for the nine months ended March 31, 2024. This is a decrease in net income of $419,034 with a decrease of $277,415 on a constant currency basis, compared to the prior year. Net income for basic and diluted shares was $0.03 and $0.07 for the nine months ended March 31, 2025 and 2024, respectively. Page 47 Non-GAAP Financial Measures Regulation S-K Item 10(e), “Use of Non-GAAP Financial Measures in Commission Filings,” defines and prescribes the conditions for use of non-GAAP financial information. Our measures of adjusted EBITDA and adjusted EBITDA per basic and diluted share meet the definition of a non-GAAP financial measure. We define the non-GAAP measures as follows: ● EBITDA is GAAP net income or loss before net interest expense, income tax expense, depreciation and amortization. ● Non-GAAP adjusted EBITDA is EBITDA plus stock-based compensation expense. ● Adjusted EBITDA per basic and diluted share – Adjusted EBITDA allocated to common stock divided by the weighted average shares outstanding and diluted shares outstanding. We use non-GAAP measures internally to evaluate the business and believe that presenting non-GAAP measures provides useful information to investors regarding the underlying business trends and performance of our ongoing operations as well as useful metrics for monitoring our performance and evaluating it against industry peers. The non-GAAP financial measures presented should be used in addition to, and in conjunction with, results presented in accordance with GAAP, and should not be relied upon to the exclusion of GAAP financial measures. Management strongly encourages investors to review our consolidated financial statements in their entirety and not to rely on any single financial measure in evaluating the Company. The non-GAAP measures reflect adjustments based on the following items: EBITDA : We report EBITDA as a non-GAAP metric by excluding the effect of net interest expense, income tax expense, depreciation and amortization from net income or loss because doing so makes internal comparisons to our historical operating results more consistent. In addition, we believe providing an EBITDA calculation is a more useful comparison of our operating results to the operating results of our peers. Stock-based compensation expense : We have excluded the effect of stock-based compensation expense from the non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA per basic and diluted share calculations. Although stock-based compensation expense is calculated in accordance with current GAAP and constitutes an ongoing and recurring expense, such expense is excluded from non-GAAP results because it is not an expense which generally requires cash settlement by NetSol, and therefore is not used by us to assess the profitability of our operations. We also believe the exclusion of stock-based compensation expense provides a more useful comparison of our operating results to the operating results of our peers. Non-controlling interest : We add back the non-controlling interest in calculating gross adjusted EBITDA and then subtract out the income taxes, depreciation and amortization and net interest expense attributable to the non-controlling interest to arrive at a net adjusted EBITDA. Page 48 Our reconciliation of the non-GAAP financial measures of adjusted EBITDA and non-GAAP earnings per basic and diluted share to the most comparable GAAP measures for the three and nine months ended March 31, 2025 and 2024 are as follows: For the Three Months Ended March 31, For the Nine Months Ended March 31, 2025 2024 2025 2024 Net Income (loss) attributable to NetSol $ 1,423,968 $ 327,549 $ 347,721 $ 766,755 Non-controlling interest 410,462 (11,679 ) 518,212 822,993 Income taxes 151,334 146,569 712,765 418,517 Depreciation and amortization 363,503 391,290 1,102,085 1,351,239 Interest expense 194,742 289,677 689,347 856,016 Interest (income) (294,655 ) (376,466 ) (1,593,594 ) (1,259,464 ) EBITDA $ 2,249,354 $ 766,940 $ 1,776,536 $ 2,956,056 Add back: Non-cash stock-based compensation 39,750 149,088 134,884 260,875 Adjusted EBITDA, gross $ 2,289,104 $ 916,028 $ 1,911,420 $ 3,216,931 Less non-controlling interest (a) (510,908 ) (106,480 ) (718,218 ) (1,216,091 ) Adjusted EBITDA, net $ 1,778,196 $ 809,548 $ 1,193,202 $ 2,000,840 Weighted Average number of shares outstanding Basic 11,683,408 11,390,888 11,531,365 11,369,778 Diluted 11,683,408 11,430,493 11,531,365 11,409,383 Basic adjusted EBITDA $ 0.15 $ 0.07 $ 0.10 $ 0.18 Diluted adjusted EBITDA $ 0.15 $ 0.07 $ 0.10 $ 0.18 (a)The reconciliation of adjusted EBITDA of non-controlling interest to net income attributable to non-controlling interest is as follows Net Income (loss) attributable to non-controlling interest $ 410,462 $ (11,679 ) $ 518,212 $ 822,993 Income Taxes 41,891 43,852 214,892 155,636 Depreciation and amortization 87,504 97,027 269,185 348,143 Interest expense 54,461 89,738 202,289 266,922 Interest (income) (83,410 ) (115,021 ) (491,422 ) (387,690 ) EBITDA $ 510,908 $ 103,917 $ 713,156 $ 1,206,004 Add back: Non-cash stock-based compensation - 2,563 5,062 10,087 Adjusted EBITDA of non-controlling interest $ 510,908 $ 106,480 $ 718,218 $ 1,216,091 Page 49 LIQUIDITY AND CAPITAL RESOURCES Our cash position was $18,774,739 at March 31, 2025, compared to $19,127,165 at June 30, 2024. Net cash provided by operating activities was $6,315 for the nine months ended March 31, 2025 compared to net cash used in operating activities of $3,602,677 for the nine months ended March 31, 2024. At March 31, 2025, we had current assets of $42,411,540 and current liabilities of $18,738,636. We had accounts receivable of $5,443,498 at March 31, 2025 compared to $13,049,614 at June 30, 2024. We had revenues in excess of billings of $15,424,896 at March 31, 2025 compared to $13,638,547 at June 30, 2024 of which $697,486 and $954,029 is shown as long-term as of March 31, 2025 and June 30, 2024, respectively. The long-term portion was discounted by $97,285 and $152,446 at March 31, 2025 and June 30, 2024, respectively, using the discounted cash flow method with interest rates ranging from 7.3% to 17.5%. During the nine months ended March 31, 2025, our revenues in excess of billings were reclassified to accounts receivable pursuant to billing requirements detailed in each contract. The combined totals for accounts receivable and revenues in excess of billings decreased by $5,819,767 from $26,688,161 at June 30, 2024 to $20,868,394 at March 31, 2025. At March 31, 2025 and June 30, 2024, accounts payable and accrued expenses were $7,097,343 and $8,232,842, respectively. At March 31 2025 and June 30, 2024 the current portions of loans and lease obligations were $8,459,991 and $6,276,125, respectively. The average days sales outstanding for the nine months ended March 31, 2025 and 2024 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 revenues in excess of billings. Net cash used in investing activities was $843,044 for the nine months ended March 31, 2025, compared to $822,451 for the nine months ended March 31, 2024. We had purchases of property and equipment of $897,743 compared to $948,337 for the nine months ended March 31, 2024. Net cash provided by financing activities was $866,299 for the nine months ended March 31, 2025, compared to $33,612 for the nine months ended March 31, 2024. During the nine months ended March 31, 2025, we received bank proceeds of $2,451,256 compared to $340,847 during the nine months ended March 31, 2024. During the nine months ended March 31, 2025, we had net payments for bank loans and finance leases of $247,496 compared to $307,235 for the nine months ended March 31, 2024. Employees of the Company exercised 220,00 options of common stock for $473,000. NetSol PK, a subsidiary of the Company, paid a dividend of $306,799 to the non-controlling shareholders. NetSol PK purchased 2,690,251 shares of its common stock from the open market for $1,503,662. We are operating in various geographical regions of the world through our various subsidiaries. Those subsidiaries have financial arrangements from various financial institutions to meet both their short and long-term funding requirements. These loans will become due at different maturity dates as described in Note 12 of the financial statements. We are in compliance with the covenants of the financial arrangements and there is no default, which may lead to early payment of these obligations. We anticipate paying back all these obligations on their respective due dates from its own sources. We typically fund the cash requirements for our operations in the U.S. through our license, services, and subscription and support agreements, intercompany charges for corporate services, and through the exercise of options and warrants. As of March 31, 2025, we had approximately $18.8 million of cash, cash equivalents and marketable securities of which approximately $17.8 million is held by our foreign subsidiaries. As of June 30, 2024, we had approximately $19.1 million of cash, cash equivalents and marketable securities of which approximately $18.2 million is held by our foreign subsidiaries. We remain open to strategic relationships that would provide value added benefits. The focus will remain on continuously improving cash reserves internally and reduced reliance on external capital raise. As a growing company, we have on-going capital expenditure needs based on our short term and long-term business plans. Although our requirements for capital expenses vary from time to time, for the next 12 months, we anticipate needing $1.5 million for APAC, the U.S. and Europe’s new business development activities and infrastructure enhancements, which we expect to provide from current operations. Page 50 Financial Covenants Our UK based subsidiary, NTE, has an approved overdraft facility of £300,000 ($389,610) which requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. The Pakistani subsidiary, NetSol PK has an approved facility for export refinance from Askari Bank Limited amounting to Rupees 600 million ($2,145,846) and a running finance facility of Rupees 4.1 million ($14,488). NetSol PK has an approved facility for export refinance from another Habib Metro Bank Limited amounting to Rupees 1.3 billion ($4,649,333). These facilities require NetSol PK to maintain a long-term debt equity ratio of 60:40 and the current ratio of 1:1. NetSol PK also has an approved export refinance facility of Rs. 380 million ($1,359,036) from Samba Bank Limited. During the loan tenure, these two facilities require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times. As of the date of this report, we are in compliance with the financial covenants associated with our borrowings. The maturity dates of the borrowings of respective subsidiaries may accelerate if they do not comply with these covenants. In case of any change in control in subsidiaries, they may have to repay their respective credit facilities. CRITICAL ACCOUNTING POLICIES Our condensed consolidated financial statements are prepared applying certain critical accounting policies. The SEC defines “critical accounting policies” as those that require application of management’s most difficult, subjective, or complex judgments. Critical accounting policies require numerous estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect our reported results and financial position for the period or in future periods. Changes in underlying factors, assumptions, or estimates in any of these areas could have a material impact on our future financial condition and results of operations. Our financial statements are prepared in accordance with U.S. GAAP, and they conform to general practices in our industry. We apply critical accounting policies consistently from period to period and intend that any change in methodology occur in an appropriate manner. There have been no significant changes to our accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024. RECENT ACCOUNTING PRONOUNCEMENTS For information with respect to recent accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 2 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report. Item 3. Quantitative and Qualitative Disclosures about Market Risks. None.