NETSOL TECHNOLOGIES INC 10-Q

LEASES

6 Months Ended

Dec. 31, 2025

NOTE 10 - LEASES

The Company leases certain office space, office equipment and autos with remaining lease terms of one year to 10 years under leases classified as financing and operating. For certain leases, the Company has options to extend the lease term for additional periods ranging from one year to 10 years.

The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at the commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value.

The Company reviews the impairment of ROU assets consistent with the approach applied to the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.

The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts.

Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a re-measurement of lease liabilities. The Company’s variable lease payments include payments for finance leases that are adjusted based on a change in the Karachi Inter Bank Offer Rate. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.

Supplemental balance sheet information related to leases was as follows:

	As of		As of
	December 31, 2025		June 30, 2025
Assets
Operating lease assets, net	$	1,015,011	$	809,513

Liabilities
Current
Operating	$	542,022	$	433,242
Operating, Current	$	542,022	$	433,242
Non-current
Operating		414,725		333,374
Operating, Noncurrent		414,725		333,374
Total Lease Liabilities	$	956,747	$	766,616

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

December 31, 2025

(Unaudited)

The components of lease cost were as follows:

SCHEDULE OF COMPONENTS OF LEASE COST


	For the Three Months						For the Six Months
	Ended December 31,						Ended December 31,
	2025			2024			2025			2024

Amortization of finance lease assets	$	8,015		$	7,720		$	16,140		$	21,597
Interest on finance lease obligation		3,001			2,907			6,043			5,994
Operating lease cost		181,861			98,492			263,488			198,338
Short term lease cost		80,964			60,477			157,429			110,040
Sub lease income		(8,854	)		(8,514	)		(17,828	)		(16,920	)
Total lease cost	$	264,987		$	161,082		$	425,272		$	319,049

Lease term and discount rate were as follows:

Supplemental disclosures of cash flow information related to leases were as follows:


	For the Six Months
	Ended December 31,
	2025		2024

Operating cash flows related to operating leases	$	295,894	$	185,514

Operating cash flows related to finance leases	$	6,042	$	5,994

Financing cash flows related finance leases	$	6,021	$	9,296

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

December 31, 2025

(Unaudited)

Maturities of operating lease liabilities were as follows as of December 31, 2025:

	Amount
Within year 1	$	577,728
Within year 2		273,739
Within year 3		148,238
Within year 4		11,092
Total Lease Payments		1,010,797
Less: Imputed interest		(54,050	)
Present Value of lease liabilities		956,747
Less: Current portion		(542,022	)
Non-Current portion	$	414,725

The Company is a lessor for certain office space leased by the Company and sub-leased to others under non-cancellable leases. These lease agreements provide for a fixed base rent and are currently on a month-by-month basis. All leases are considered operating leases. There are no rights to purchase the premises and no residual value guarantees. For the three and six months ended December 31, 2025, the Company received lease income of $8,854 and $17,828, respectively. For the three and six months ended December 31, 2024, the Company received lease income of $8,514 and $16,920, respectively.

December 31, 2025

June 30, 2025

Weighted average remaining lease term - Operating leases

Weighted average discount rate - Operating leases