Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13 – INCOME TAXES

 

The Company is incorporated in the State of Nevada and registered to do business in the State of California. The following is a breakdown of income before the provision for income taxes:

 

Consolidated pre-tax income (loss) consists of the following:

 

         
    Years Ended June 30,  
    2025     2024  
US operations   $ 1,099,957     $ (1,719,058 )
Foreign operations     4,947,300       4,942,505  
Net income before income taxes   $ 6,047,257     $ 3,223,447  

 

 

NETSOL TECHNOLOGIES, INC.

Notes to Consolidated Financial Statements

June 30, 2025 and 2024

 

The components of the provision for income taxes are as follows:

 

         
    Years Ended June 30,  
    2025     2024  
Current:            
Federal   $ -     $ -  
State and Local     1,600       1,600  
Foreign     1,411,601       1,143,918  
                 
Deferred:                
Federal     -       -  
State and Local     -       -  
Foreign     63,137       -  
Provision for income taxes   $ 1,476,338     $ 1,145,518  

 

A reconciliation of taxes computed at the statutory federal income tax rate to income tax expense (benefit) is as follows:

 

    Years Ended June 30,        
    2025           2024        
Income tax (benefit) provision at statutory rate   $ 1,269,924       21.0 %   $ 676,924       21.0 %
State income (benefit) taxes, net of federal tax benefit     422,099       7.0 %     224,997       7.0 %
Foreign earnings taxed at different rates     90,483       1.5 %     (238,995 )     -7.4 %
Change in valuation allowance for deferred tax assets     (179,699 )     -3.0 %     351,633       10.9 %
Other     (126,469 )     -2.1 %     130,959       4.1 %
Provision for income taxes   $ 1,476,338       24.4 %   $ 1,145,518       35.5 %

 

Deferred income tax assets and liabilities as of June 30, 2025 and 2024 consist of tax effects of temporary differences related to the following:

 

         
    Years Ended June 30,  
    2025     2024  
Net operating loss carry forwards   $ 10,963,495     $ 11,190,703  
Other     200,323       152,814  
Net deferred tax assets     11,163,818       11,343,517  
Valuation allowance for deferred tax assets     (11,163,818 )     (11,343,517 )
Net deferred tax assets   $ -     $ -  

 

The Company has established a full valuation allowance as management believes it is more likely than not that these assets will not be realized in the future. The valuation allowance decreased by $179,699 for the year ended June 30, 2025.

 

At June 30, 2025, federal and state net operating loss carry forwards in the United States of America were $29,570,036 and $8,736,297, respectively. Federal net operating loss carry forwards begin to expire in 2028, while state net operating loss carry forwards are expiring each year. Due to both historical and recent changes in the capitalization structure of the Company, the utilization of net operating losses may be limited pursuant to section 382 of the Internal Revenue Code. Net operating losses related to foreign entities were $16,546,754 at June 30, 2025.

 

 

NETSOL TECHNOLOGIES, INC.

Notes to Consolidated Financial Statements

June 30, 2025 and 2024

 

As of June 30, 2025, the Company does not have any unrecognized tax benefits related to various federal and state income tax matters. The Company will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

 

The Company is subject to U.S. federal income tax, as well as various state and foreign jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending June 30, 2022 through 2024. The Company does not anticipate any material amount of unrecognized tax benefits within the next 12 months.

 

The cumulative amount of undistributed earnings of foreign subsidiaries that the Company intends to permanently invest and upon which no deferred US income taxes have been provided is $29,879,503 as of June 30, 2025. The additional US income tax on unremitted foreign earnings, if repatriated, would be offset in part by foreign tax credits. The extent of this offset would depend on many factors, including the method of distribution, and specific earnings distributed. The Company determined that it is not practicable to determine unrecognized deferred tax liability associated with the unremitted earnings attributable to the foreign subsidiaries.