DEFR14A: NetSol Technologies Amends Proxy Statement, Changes Auditor Ahead of 2023 Annual Meeting

NetSol Technologies amends its proxy statement to request shareholder ratification of Fortune CPA, Inc. as the company's independent auditor for fiscal year 2024, replacing the previous proposal for Fortune CPA, Inc.

Summary

• NetSol Technologies, Inc. has filed an amendment to its proxy statement for the 2023 Annual Meeting of Shareholders to be held on June 13, 2024.
• The amendment replaces Proposal 3, which now requests shareholders to ratify the appointment of Fortune CPA, Inc. as the company's independent auditor for the fiscal year ending June 30, 2024.
• This replaces the previous proposal to ratify the appointment of Fortune CPA, Inc.
• Votes received for Proposal 3 prior to the amendment will still be counted.
• The board recommends voting FOR the election of directors, FOR the advisory vote on executive compensation, and FOR the ratification of Fortune CPA, Inc. as the independent auditor.
• The company highlights its partnership with Amazon Web Services (AWS), a contract with a tier 1 automotive company, and the launch of new products like Flex and Hubex.
• NetSol achieved the status of Foundational Technical Review Badge Delivery Partner with AWS.
• The company successfully re-negotiated contracts with existing customers in the UK and China, expecting to generate nearly $2 million and increasing annual maintenance fees to $500K from $280K, respectively.
• NetSol established a new subsidiary in Dubai to penetrate the MENA region and opened a development and support center in Austin, Texas.
• The company's employee turnover rate was approximately 19% in 2023, with a goal to maintain it under 21% in fiscal year 2024.
• As of June 30, 2023, NetSol had approximately 1,770 employees, with 76% being technical staff.
• The Board of Directors has nominated five directors for election to one-year terms expiring at the 2024 annual meeting: Najeeb Ghauri, Mark Caton, Malea Farsai, Michael Francis, and Kausar Kazmi.
• On May 6, BF Borgers CPA PC was dismissed as the independent registered public accounting firm of NetSol Technologies, Inc. and Fortune CPA, Inc. was appointed.
• The aggregate fees billed by BF Borgers for the annual audit and review of financial statements was $262,500 and $250,000 for the years ended June 30, 2023 and 2022, respectively.
• Tax fees for fiscal year 2023 were $16,000 and consisted of the preparation of the Company's federal and state tax returns for the fiscal years 2022.
• The Board recommends shareholders vote FOR each of the five director nominees, FOR the advisory vote on executive compensation, and FOR ratifying the selection of Fortune CPA, Inc. as the Company's independent auditor for fiscal year ending June 30, 2024.

Sentiment

Score: 7

Explanation: The document presents a balanced view, acknowledging challenges while highlighting achievements and future opportunities. The overall tone is positive, reflecting confidence in the company's strategic direction and resilience.

Positives

• NetSol has partnered with Amazon Web Services (AWS) to offer cloud computing services.
• The company signed a contract with a tier 1 automotive company in the U.S. for its mobility solution.
• NetSol launched new products, Flex and Hubex, expanding its product offerings.
• Otoz is expanding its dealer network, expected to generate approximately $1.1 million in annual recurring revenues.
• The company successfully re-negotiated contracts with existing customers, increasing revenue streams.
• NetSol established a new subsidiary in Dubai to penetrate the MENA region.
• The company opened a development and support center in Austin, Texas, to support growth in North America.
• NetSol is committed to improving key performance indicators such as efficiency, productivity, and revenue per employee.
• The company is taking actions to transform its business to preserve liquidity, sustain key investments, and improve performance.
• NetSol is focused on environmental sustainability, implementing recycling programs and reducing waste in its offices.

Negatives

• The document mentions challenges such as inflation headwinds, strained supply chains, and economic uncertainties.
• The company's employee turnover rate was approximately 19% in 2023, although the goal is to maintain it under 21% in fiscal year 2024.
• BF Borgers CPA PC was dismissed as the independent registered public accounting firm of NetSol Technologies, Inc.

Risks

• The company faces challenges related to inflation, supply chain issues, and economic uncertainties.
• There is significant competition for employees with the skills required to perform the services NetSol offers.
• The company's success depends on its ability to attract and retain high-level talent.
• The company's future performance is subject to numerous risks and uncertainties, including those discussed in its annual report on Form 10-K.

Future Outlook

NetSol remains committed to adapting to the evolving business and social environment and is optimistic about its future, focusing on transforming its business to meet customer preferences and position the company for long-term success.

Management Comments

• Najeeb Ghauri, Chairman and CEO, expressed gratitude for serving since 2006 and acknowledged the challenges and global issues impacting the organization.
• Mr. Ghauri highlighted the resilience and dedication of the leadership team and employees in collaborating with customers, innovating, providing customer service, and enhancing shareholder value.
• Mr. Ghauri remains upbeat and very excited about NetSol's future.

Industry Context

NetSol operates in the leasing and finance IT solutions space, competing with other global IT institutions. The company is focused on expanding its presence in key markets and diversifying into complementary verticals through organic expansion, partnerships, and M&A.

Comparison to Industry Standards

• The document mentions benchmarking executive compensation against peer companies in the technology industry, including American Software, Inc., BSquare Corp., Cass Information Systems, Digital Turbine, Inc., Everbridge, Inc., Mitek Systems, Inc., and SPS Commerce Inc.
• The aim is to compensate the Board of Directors at the mean of peer companies.
• The company is focused on maintaining a competitive edge through superior technical capabilities and a talented workforce.

Stakeholder Impact

• Shareholders are asked to vote on key proposals, including the election of directors, executive compensation, and the ratification of the independent auditor.
• Employees are recognized for their resilience and dedication in navigating global challenges.
• Customers are assured of the company's commitment to providing exceptional customer service.
• The company aims to enhance shareholder value through financial performance and strategic initiatives.

Next Steps

• Shareholders are encouraged to review the proxy materials and submit their votes via the internet, telephone, mail, or in person.
• The company will hold its Annual Meeting of Shareholders on June 13, 2024.
• The Board will act on the Nominating and Corporate Governance Committee's recommendation regarding the offer of resignation within 90 days following the shareholder meeting.
• The Audit Committee will continue to evaluate the independent public accounting firm's qualifications annually.

Key Dates

Keywords

NetSol Technologies, proxy statement, annual meeting, Fortune CPA, independent auditor, executive compensation, board of directors, financial performance, NFS Ascent, AWS, governance