CLPS(US:CLPS)2025-10-17 13:21PART I ITEM 1. Identity of Directors, Senior Management and Advisers Information regarding directors, senior management, and advisers is not required for this report - Information regarding the identity of directors, senior management, and advisers is not required28 ITEM 2. Offer Statistics and Expected Timetable Information on offer statistics and expected timetable is not required for this report - Information on offer statistics and expected timetable is not required29 ITEM 3. Key Information This section provides key information, including detailed risk factors related to business, corporate structure, and China operations - Investment in the company's securities involves a high degree of risk, requiring careful consideration of described factors32 A. [Reserved] This sub-item is reserved and contains no specific information - This section is reserved30 B. Capitalization and Indebtedness Information on capitalization and indebtedness is not required for this report - Information on capitalization and indebtedness is not required30 C. Reasons for the Offer and Use of Proceeds Information on the reasons for the offer and use of proceeds is not required for this report - Information on the reasons for the offer and use of proceeds is not required31 D. Risk factors This section outlines significant risks impacting the company's business, financial condition, and operations, categorized by business, corporate structure, and China-specific factors Risks Related to Our Business The company faces business risks including growth management, intense competition, talent retention, client concentration, technological changes, economic downturns, and potential liabilities - The company's revenues decreased from $150.4 million in fiscal 2023 to $142.8 million in fiscal 2024, then increased to $164.5 million in fiscal 2025, driven by IT consulting demand from financial institutions42 - Annual voluntary employee attrition rates were 18% in fiscal 2023, 18.6% in fiscal 2024, and 14.5% in fiscal 202547 Revenue Contribution from Top Clients | Fiscal Year | Top Client Revenue % | Citibank & Affiliates Revenue % | | :---------- | :------------------- | :------------------------------ | | 2025 | 13.4% | N/A | | 2024 | N/A | 16.7% | | 2023 | N/A | 21.4% | Accounts Receivable, Net | As of June 30, | Amount (approx.) | | :------------- | :--------------- | | 2025 | $44.9 million | | 2024 | $38.8 million | - The company's computer networks are vulnerable to security risks like unauthorized access, hackers, and viruses, potentially disrupting services and adversely affecting operations93 Risks Related to Corporate Structure Corporate structure risks include dividend limitations, subsidiary liquidation impacts, statutory reserve requirements, CSRC approval non-compliance, and misuse of company chops - The company will likely not pay dividends in the foreseeable future, with future dividends subject to Board discretion and Cayman Islands law102 - PRC subsidiaries must allocate at least 10% of after-tax profits to a statutory reserve fund, restricting distribution to equity owners and potentially limiting dividends105 - Failure to obtain prior CSRC approval for overseas listing or subsequent offerings could materially and adversely affect the company's business, operating results, and stock price106107109 Risks Related to Doing Business in China Operating in China involves risks from government policy changes, legal uncertainties, regulatory interventions (cybersecurity, data security), and compliance with PRC regulations, alongside U.S.-China trade tensions and HFCAA delisting risks - Adverse changes in Chinese government policies could materially and adversely affect the company's business growth and competitive position114 - Substantial uncertainties exist regarding China's Cyber Security Law, potentially leading to significant costs or business practice changes if identified as a 'critical information infrastructure' operator115116117118119121122123 - The HFCAA could lead to delisting from Nasdaq if the auditor cannot be fully inspected by the PCAOB for two consecutive fiscal years, potentially eliminating a readily available market for shares160165 - Escalating U.S.-China trade tensions, including tariffs and export controls, could negatively impact customer service, cost management, and competitive pricing209210211 ITEM 4. Information on the Company This section provides a comprehensive overview of CLPS Incorporation, covering its history, business operations, market, strategies, strengths, customers, R&D, employees, IP, properties, legal matters, and regulations - CLPS is a global IT consulting and solutions provider, primarily serving global institutions in banking, wealth management, e-commerce, and automotive sectors251 - The company leverages AI, cloud computing, and big data innovations to drive digital transformation and optimize operational efficiency251 - CLPS operates across 10 countries with strategic hubs in Shanghai, Singapore, and California, supported by subsidiaries in Japan and the UAE252 A. History and Development of the Company CLPS Incorporation, established in 2017, is a global IT consulting and solutions provider specializing in fintech, expanding globally through organic growth and acquisitions, and completed its NASDAQ IPO in 2018, raising $12.08 million - CLPS Incorporation was established on May 11, 2017, in the Cayman Islands, focusing on IT consulting and solutions for global institutions across various sectors217219 - The company operates across 10 countries with strategic hubs in Shanghai, Singapore, and California, supported by subsidiaries in Japan and the UAE218 - CLPS completed its IPO on NASDAQ on May 24, 2018, raising approximately $12.08 million in gross proceeds249 IPO Proceeds Allocation | Purpose | Amount (approx.) | | :------------------------------------ | :--------------- | | Global expansion | $4.41 million | | Working capital & general corporate | $3.31 million | | Research & Development | $2.21 million | | Talent development | $1.09 million | B. Business Overview CLPS Incorporation is a global IT consulting and solutions provider driving digital transformation in fintech, financial services, e-commerce, education, and automotive sectors, leveraging AI, cloud, and big data across 10 countries Industry and Market Background China's banking industry total assets reached RMB 444.6 trillion (USD 60.9 trillion) in 2024, with the software and IT service industry revenue at RMB 13.7 trillion (USD 1.9 trillion), and the banking IT solution market projected to reach RMB 103.94 billion (USD 14.2 billion) by 2029 China's Banking Financial Institutions Key Metrics (2024) | Metric | Amount (RMB) | Amount (USD) | YoY Increase (RMB) | YoY Increase (USD) | YoY Growth % | | :------------ | :------------------ | :------------------ | :------------------ | :------------------ | :----------- | | Total Assets | 444.6 trillion | 60.9 trillion | 27.3 trillion | 3.7 trillion | 6.5% | | Total Liabilities | 408.1 trillion | 55.9 trillion | 25.0 trillion | 3.4 trillion | 6.5% | China's Software and IT Service Industry Performance (2024) | Metric | Amount (RMB) | Amount (USD) | YoY Growth % | | :------------ | :------------------ | :------------------ | :----------- | | Industry Revenue | 13.7 trillion | 1.9 trillion | 10.0% | | Total Profit | 1.69 trillion | 231.5 billion | 8.7% | | Software Exports | N/A | 56.9 billion | 3.5% | - China's banking IT solution market reached RMB 71.3 billion (USD 9.8 billion) in 2024, a 2.9% increase, and is projected to reach RMB 103.94 billion (USD 14.2 billion) by 2029 with a 7.8% CAGR265 Our Primary Operational Areas CLPS focuses on Banking, Credit Card, Core Banking, Wealth Management, E-Commerce, and Automotive, providing specialized IT consulting and solutions, leveraging proprietary products and industry experience for digital transformation Banking CLPS provides comprehensive IT consulting and solutions for the banking industry, offering services from system implementation to IT staffing, leveraging 20+ years of experience and proprietary products Banking Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $64.1 million | 39.0% | | 2024 | $57.2 million | 40.0% | | 2023 | $61.5 million | 40.9% | Credit Card Area CLPS offers over a decade of IT consulting experience for credit card business, covering applications, authorization, settlement, and risk management, with global client service from Shanghai, Dalian, and Hong Kong Credit Card Revenue | Fiscal Year | Revenue (approx.) | % of Banking Revenues | | :---------- | :---------------- | :-------------------- | | 2025 | $2.4 million | 3.8% | | 2024 | $2.5 million | 4.4% | | 2023 | $4.3 million | 7.0% | Core Banking Area CLPS is a leading core banking system services provider for global banks in China, offering comprehensive IT services from business analysis to global operation support, specializing in cloud-native and microservices architecture solutions Core Banking Revenue | Fiscal Year | Revenue (approx.) | | :---------- | :---------------- | | 2025 | $61.7 million | | 2024 | $54.6 million | | 2023 | $57.2 million | Wealth Management CLPS has nearly two decades of wealth management experience, offering solutions for system construction, development, and testing across securities, funds, insurance, and trust industries, supported by over 1,000 professionals globally Wealth Management Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $29.3 million | 17.8% | | 2024 | $35.6 million | 24.9% | | 2023 | $37.4 million | 24.9% | E-Commerce CLPS drives e-commerce innovation, supporting diverse business models including online marketplaces, cross-border e-commerce, and live streaming, offering holistic services from system construction to marketing, with specialized solutions like the Digital RMB (Points) Mall E-Commerce Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $29.8 million | 18.1% | | 2024 | $21.2 million | 14.8% | | 2023 | $25.5 million | 17.0% | Automotive CLPS is deeply involved in the automotive sector, focusing on big data governance, data analysis, intelligent cockpits, and in-car experience interaction, leveraging big data and AI for optimization solutions Automotive Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $20.8 million | 12.6% | | 2024 | $14.2 million | 10.0% | | 2023 | $14.2 million | 9.4% | Our Business Scope by Services CLPS offers a diversified service portfolio including IT Consulting, Customized IT Solution Services, Academic Education Services, and Other Services, with IT consulting as the largest revenue contributor IT Consulting Services CLPS provides IT consulting services primarily to banking, wealth management, e-commerce, and automotive clients, billed on a time-and-expense basis, and representing the vast majority of total revenues IT Consulting Services Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $158.8 million | 96.5% | | 2024 | $136.8 million | 95.8% | | 2023 | $144.3 million | 96.0% | Customized IT Solution Services CLPS offers customized IT solution services, including system design and integration, for banking, wealth management, e-commerce, and automotive clients, with fixed-price contracts recognized upon acceptance or over time, and ongoing R&D Customized IT Solution Services Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $2.8 million | 1.7% | | 2024 | $3.1 million | 2.2% | | 2023 | $4.6 million | 3.0% | Academic Education Services Academic education services, provided by CAE (acquired in fiscal 2024), generate revenue from fixed tuition fees, with CLPS expanding the curriculum to include IT courses and internship opportunities Academic Education Services Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $2.0 million | 1.2% | | 2024 | $1.0 million | 0.7% | Other Services Other services include the CLPS Virtual Banking Platform (CLB) for IT talent training, recruitment, fee-for-service training, and software sales, supporting human capital development and client needs - CLPS Virtual Banking Platform (CLB) is a proprietary training platform for specialized financial IT personnel, a crucial component of the Talent Creation Program (TCP)301 - The company maintains 90 talent acquisition staff and leverages cloud platforms, big data, RPA, and AI to accelerate recruitment302 Other Services Revenue | Fiscal Year | Revenue (approx.) | % of Total Revenues | | :---------- | :---------------- | :------------------ | | 2025 | $0.9 million | 0.5% | | 2024 | $1.8 million | 1.2% | | 2023 | $1.5 million | 1.0% | Our Strategies CLPS strategies focus on revenue growth from existing and new clients, R&D investment in AI, cloud, and big data, human capital development, operational efficiency, strategic alliances, global expansion, and diversification into new sectors - For fiscal year 2025, revenues from existing clients accounted for 97.9% and new clients for 2.1% of total revenue306 - CLPS is investing in AI, cloud computing, and big data, developing a unified platform for custom Large Language Model (LLM) agents and pioneering AIGC technology309 - The CLPS Academy spearheads Talent Creation Program (TCP) and Talent Development Program (TDP), training over 196 interns in fiscal year 2025 to build and retain a professional talent pool310319 - The company expanded its global footprint by establishing Ridik Dubai and Ridik Indonesia, and deepened business-education integration by inaugurating College of Allied Educators (CAE) in Singapore313 Our Competitive Strengths CLPS's competitive strengths include broad digital transformation services, robust TCP/TDP programs, highly skilled bilingual human capital, an expanding global footprint, and strategic engagements with blue-chip clients - CLPS offers comprehensive digital transformation services focused on financial and technology sectors, including core banking, credit card, e-commerce systems, and advanced technologies like cloud transitions, RPA, big data, blockchain, and AI317318 - The CLPS Academy's TCP and TDP programs provide extensive training in domain knowledge, technology skills, data security, and English language, distinguishing the company from competitors319320 - As of fiscal year 2025, CLPS had over 3,534 employees, with more than 2,982 IT talents serving customers, many possessing strong English communication skills and international financial business familiarity323324 - CLPS operates in key markets including mainland China, Hong Kong SAR, Singapore, the United States, India, Japan, Canada, the Philippines, Malaysia, the United Arab Emirates, and Indonesia325 - Revenue generated outside mainland China grew by 90.5% year-over-year to $42.5 million in fiscal year 2025327 Customers CLPS serves major global and Chinese corporations in banking, wealth management, e-commerce, and automotive/technology sectors, leveraging shared resources and expertise to attract and retain a diverse client base - CLPS's clients include major corporations in banking, wealth management, e-commerce, and automotive/technology sectors, both in China and globally328330 Sales and Marketing CLPS has a dedicated sales and marketing team of 67 full-time personnel as of June 30, 2025, with plans to expand to enhance sales efforts and capture growth opportunities - As of June 30, 2025, the business development team consisted of 67 full-time sales and marketing personnel, including 31 sales managers329 Competition The IT services market is highly competitive, with CLPS facing domestic and international competitors, differentiating itself through specialized industry analysis, focus on global financial institutions, and extensive banking IT services experience - The IT services market is highly competitive, with key factors including industry expertise, service offerings, quality, reputation, marketing, scalability, and price331 - Domestic competitors include Shenzhen Forms Syntron Information Co., Ltd., Sunline Tech, Amarsoft, and CSII, while international competitors include Wipro, TCS Consultancy, and Infosys Limited331 Research and Development CLPS Innovation Lab (CLPS i-Lab) drives R&D, focusing on cutting-edge technologies like distributed systems, cloud computing, microservices, open API, RPA, blockchain, AI, and big data to enhance innovation and market competitiveness - CLPS Innovation Lab (CLPS i-Lab) is committed to researching and developing cutting-edge technologies including distributed application systems, cloud computing, microservices, open API, RPA, blockchain, AI, and big data332 - CLPS offers extensive experience in cloud computing, specializing in virtualization and major cloud platforms, transforming financial institutions through cloud migration and cloud-native application development334 - CLPS is a leading force in AIGC technology, focusing on research, application development, and ecosystem building, including a platform for developing custom LLM agents335 - CLPS specializes in blockchain technology, exploring innovative applications to revolutionize the banking and financial services industry with decentralized, immutable, and traceable solutions336 Employees CLPS had 3,534 employees as of June 30, 2025, with approximately 53% serving foreign financial institution clients, possessing strong domain and technical skills, and maintaining good employee relations without significant labor disputes Employee Count (Fiscal Year End) | Fiscal Year | Number of Employees | | :---------- | :------------------ | | 2025 | 3,534 | | 2024 | 3,325 | | 2023 | 3,509 | - Approximately 53% of CLPS personnel are dedicated to serving foreign financial institution clients, with expertise in Java, .Net, C, C++, testing tools, Android/iOS app, blockchain, big data, cloud computing, AI, and mainframe COBOL340 Intellectual Property Rights CLPS protects its intellectual property through copyrights, trademarks, software registrations, anti-unfair competition, trade secret laws, and confidentiality agreements, holding a portfolio of trademarks, numerous software copyrights, and patents related to credit card clearing and data processing - CLPS relies on a combination of copyright, trademark, software registration, anti-unfair competition, and trade secret laws, along with confidentiality agreements, to protect its intellectual property342 - The company's primary trademark portfolio consists of five trademarks, and it owns 3 URL designations and domain names343 - CLPS has registered numerous software copyrights in China, covering platforms such as HR Management, Food and Beverage Report Analysis, Apparel Industry POS Management, Bank Monetary Transaction Management, and various credit card and financial management software347348349350351352353354355356357 - The company holds patents in China for Credit Card Clearing and Settlement Platform, Batch Task Processing Method and Server, Task Data Processing Method and Device for Credit Card Platform, and Distributed Scheduling Platform and Scheduling Method for Credit Cards358 Properties CLPS relocated its principal executive office to Hong Kong SAR in July 2023, acquired for US$11.29 million, and also acquired commercial real estate in Hong Kong for US$3.86 million and Singapore for US$4.61 million, while renting offices globally - CLPS's principal executive office is located in Hong Kong SAR, acquired for US$11,286,971359 - The company acquired commercial real estate in Hong Kong for US$3,860,000 in June 2021 and in Singapore for US$4,614,743 in July 2021360361 Rent Expenses | Fiscal Year | Rent Expenses | | :---------- | :------------ | | 2025 | $2,166,911 | | 2024 | $1,514,162 | | 2023 | $1,086,622 | Legal Proceedings CLPS is not currently involved in any legal proceedings and is unaware of any claims that could materially adversely affect its business, financial condition, results of operations, or cash flows - The company is not currently involved in any legal proceedings nor aware of any claims that could have a material adverse effect on its business365 Government Regulation CLPS operates under various government regulations, including HFCAA (identified in 2022, not expected in 2023), UFLPA compliance, and preferential IT policies in China, though RFCR introduces uncertainty; it is also subject to IP, foreign currency, dividend, and M&A regulations with enforcement uncertainties - CLPS was identified as a Commission-identified issuer under the HFCAA on November 18, 2022, but does not expect identification in 2023366 - The company is in full compliance with the Uyghur Forced Labor Prevention Act (UFLPA) and does not conduct operations in Xinjiang Uyghur Autonomous Region367 - IT services fall under 'industries for encouraging foreign investment' in China, entitling CLPS to preferential tax treatments and credit support, though the RFCR (effective August 1, 2024) introduces uncertainty about their continued availability368369370 - PRC regulations govern foreign currency exchange and dividend distribution, requiring subsidiaries to allocate profits to statutory reserves and obtain approvals for capital account transactions, potentially restricting fund transfers373376377 ITEM 4A. Unresolved Staff Comments There are no unresolved staff comments applicable to the company - This item is not applicable384 ITEM 5. Operating and Financial Review and Prospect This section provides management's discussion and analysis of CLPS Incorporation's financial condition and results, covering company overview, performance factors, acquisitions, financial results for fiscal years 2023-2025, cash flows, liquidity, capital expenditures, and critical accounting policies Overview CLPS Incorporation is a global IT consulting and solutions provider focused on banking, wealth management, e-commerce, and automotive sectors, driving digital transformation through AI, cloud computing, and big data across 10 countries - CLPS is a global IT consulting and solutions provider, primarily serving global institutions in banking, wealth management, e-commerce, and automotive sectors385 - The company operates across 10 countries with strategic hubs in Shanghai, Singapore, and California, supported by subsidiaries in Japan and the UAE386 Basis of Presentation Consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, including CLPS and its consolidated subsidiaries, with all intercompany balances and transactions eliminated - Consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, including CLPS and its consolidated subsidiaries387 Management's Discussion and Analysis of Financial Condition and Results of Operations This section details the company's financial performance, covering business overview, influencing factors, acquisitions, comprehensive analysis of revenues, expenses, and profitability for fiscal years 2023-2025, cash flow, liquidity, capital expenditures, and critical accounting policies Overview of Company CLPS Incorporation, a Cayman Islands holding company, delivers IT services and solutions to the financial services industry through subsidiaries, expanding globally via acquisitions like CAE and Shell Infotech, maintaining ISO certifications, and recognized as a High-tech Enterprise in China - CLPS Incorporation, a Cayman Islands holding company, designs, builds, and delivers IT services, solutions, and other services to clients in the financial services industry389 - Key acquisitions include CAE (College of Allied Educators Pte. Ltd.) in January 2024 for academic education, and Shell Infotech Pte. Ltd. and Shell Infotech Consulting Sdn. Bhd. in June 2024 to strengthen Southeast Asia IT services424425 - CLPS is ISO 9001, ISO 14001, ISO 27001, CMMI 5, and TMMi 3 certified, and recognized as a High-tech Enterprise by the Shanghai government432 Key Financial Highlights | Metric | FY2025 ($) | FY2024 ($) | FY2023 ($) | | :------------ | :-------------- | :-------------- | :-------------- | | Total Revenues | 164.5 million | 142.8 million | 150.4 million | | Net (Loss) Income | (6.4) million | (1.8) million | 0.2 million | | Non-GAAP Net Loss | (3.8) million | N/A | N/A | | Total Assets (as of June 30, 2025) | 118.1 million | N/A | N/A | | Cash & Equivalents (as of June 30, 2025) | 28.2 million | N/A | N/A | | Total Liabilities (as of June 30, 2025) | 60.5 million | N/A | N/A | Factors Affecting Our Results of Operations Key factors affecting CLPS's results include client acquisition and retention, service expansion through R&D and acquisitions, and attracting and retaining qualified employees, aiming to enhance its banking IT services position for sales growth and profitability - Revenue from IT consulting services increased by 16.0% ($22.0 million) in fiscal 2025 from fiscal 2024, driven by increased demand from existing clients440 - IT consulting services revenue from new clients amounted to approximately $2.6 million in fiscal 2025 and $3.3 million in fiscal 2024440 - The company's financial performance is significantly affected by its ability to attract, train, and retain a large and cost-effective pool of qualified IT professionals440 Acquisitions and Investments CLPS has expanded through various acquisitions and investments, including Huanyu (2019), CareerWin (2021), CAE (January 2024) for academic education, Shell Infotech (June 2024) for Southeast Asia IT services, and an investment in Shanghai Qinhui (2024) - CLPS acquired 100% equity interest in Huanyu in May 2019, which was liquidated on January 31, 2023437443 - The company divested its 10% equity interest in CLPS Shenzhen Robotics in May 2023 for $110,321446 - CLPS acquired 100% equity interest in CareerWin on March 3, 2021, for $289,980, which was liquidated in January 2023447452 - CLPS SG acquired 100% equity interest of College of Allied Educators Pte. Ltd. (CAE) on January 3, 2024, for $3,244,145, expanding into academic education457 - Ridik Pte. Ltd. acquired 100% equity interest of Shell Infotech Pte. Ltd. and Shell Infotech Consulting Sdn. Bhd. on June 7, 2024, for a total of $917,431, strengthening its Southeast Asia IT services459460 - CLPS Shenzhen incorporated Shanghai Qinhui in December 2024, holding a 46% equity interest valued at $0.13 million461 Results of Operations This section details the company's financial performance, including revenues, cost of revenues, gross profit, and operating expenses for fiscal years 2023-2025, and reconciles GAAP to non-GAAP measures, highlighting share-based compensation and goodwill impairment Results of Operations for Continuing Operations The company reported a net loss of $6.4 million in fiscal 2025, an increase from $1.8 million net loss in fiscal 2024, and a shift from $0.2 million net income in fiscal 2023, with total revenues increasing to $164.5 million but gross margin decreasing Consolidated Statements of Comprehensive (Loss) Income Summary | Metric | FY2025 ($) | FY2024 ($) | FY2023 ($) | | :-------------------------------------------------------- | :-------------- | :-------------- | :-------------- | | Total revenue | 164,481,414 | 142,812,726 | 150,356,539 | | Total cost of revenue | (128,175,996) | (109,865,595) | (115,874,809) | | Gross profit | 36,305,418 | 32,947,131 | 34,481,730 | | Selling and marketing expenses | (5,180,682) | (4,573,344) | (3,300,555) | | Research and development expenses | (5,815,555) | (7,155,949) | (8,336,999) | | General and administrative expenses | (31,852,179) | (25,120,010) | (21,641,317) | | Impairment of goodwill | (129,270) | - | (2,382,538) | | Subsidies and other operating income | 1,294,964 | 1,363,757 | 1,256,070 | | (Loss) income from operations | (5,377,304) | (2,538,415) | 76,391 | | Net (loss) income attributable to CLPS Incorporation's shareholders | (7,049,734) | (2,329,965) | 192,529 | | Basic (losses) earnings per common share | (0.26) | (0.09) | 0.01 | Use of Non-GAAP Financial Measures CLPS uses non-GAAP financial measures, excluding share-based compensation and goodwill impairment, to provide supplemental operating performance information, but these should not be considered in isolation from U.S. GAAP results - Non-GAAP financial measures exclude non-cash share-based compensation expenses and impairment of goodwill to provide clarity on operating performance464 Non-GAAP Financial Measures Reconciliation (FY2025) | Metric | Amount ($) | | :------------------------------------------------------------------ | :-------------- | | Loss before income tax and share of loss in equity investees (GAAP) | (5,075,614) | | Add: share-based compensation expenses and impairment of goodwill | 2,597,180 | | Non-GAAP loss before income tax and share of loss of equity investees | (2,478,434) | | Net loss (GAAP) | (6,426,564) | | Add: share-based compensation expenses and impairment of goodwill | 2,597,180 | | Non-GAAP net loss | (3,829,384) | | Non-GAAP basic losses per common share | (0.16) | For the Years Ended June 30, 2025 and 2024 Total revenues increased by 15.2% to $164.5 million in fiscal 2025, driven by IT consulting services, but gross margin decreased to 22.1%, operating expenses rose significantly, resulting in a net loss of $6.4 million, up from $1.8 million in fiscal 2024 Revenue by Service Line (FY2025 vs. FY2024) | Service Line | FY2025 Revenue ($) | % of Total (FY2025) | FY2024 Revenue ($) | % of Total (FY2024) | Variance ($) | Variance % | | :---------------------------- | :----------------- | :------------------ | :----------------- | :------------------ | :----------- | :--------- | | IT consulting services | 158,758,229 | 96.5% | 136,844,784 | 95.8% | 21,913,445 | 16.0% | | Customized IT solution services | 2,781,538 | 1.7% | 3,147,593 | 2.2% | (366,055) | (11.6)% | | Other IT services | 894,598 | 0.6% | 1,777,517 | 1.3% | (882,919) | (49.7)% | | Academic education services | 2,047,049 | 1.2% | 1,042,832 | 0.7% | 1,004,217 | 96.3% | | Total | 164,481,414 | 100.0% | 142,812,726 | 100.0% | 21,668,688 | 15.2% | - Revenue from IT consulting services increased by 16.0% to $158.8 million in fiscal 2025, with 36.8% from international banks471 - Revenue generated outside mainland China accounted for 25.9% of total revenue in fiscal 2025, up from 15.6% in fiscal 2024, driven by strong performance in Singapore, Hong Kong SAR, and the U.S475 Gross Profit and Margin (FY2025 vs. FY2024) | Metric | FY2025 ($) | FY2024 ($) | Change ($) | Change % | | :------------ | :-------------- | :-------------- | :-------------- | :------- | | Gross Profit | 36,305,418 | 32,947,131 | 3,358,287 | 10.2% | | Gross Margin | 22.1% | 23.1% | (1.0)% | N/A | - R&D expenses decreased by 18.7% to $5.8 million in fiscal 2025, primarily due to redeployment of R&D staff to deliver customized IT solutions, reclassifying expenses as cost of revenues481 - Net loss increased by $4.6 million (247.9%) to $6.4 million in fiscal 2025 from $1.8 million in fiscal 2024489 For the Years Ended June 30, 2024 and 2023 Total revenues decreased by 5.0% to $142.8 million in fiscal 2024, primarily due to declines in IT consulting and customized IT solutions, resulting in a net loss of $1.8 million, a significant decline from $0.2 million net income in fiscal 2023 Revenue by Service Line (FY2024 vs. FY2023) | Service Line | FY2024 Revenue ($) | % of Total (FY2024) | FY2023 Revenue ($) | % of Total (FY2023) | Variance ($) | Variance % | | :---------------------------- | :----------------- | :------------------ | :----------------- | :------------------ | :----------- | :--------- | | IT consulting services | 136,844,784 | 95.8% | 144,286,502 | 96.0% | (7,441,718) | (5.2)% | | Customized IT solution services | 3,147,593 | 2.2% | 4,554,200 | 3.0% | (1,406,607) | (30.9)% | | Other IT services | 1,777,517 | 1.3% | 1,515,837 | 1.0% | 261,680 | 17.3% | | Academic education services | 1,042,832 | 0.7% | - | -% | 1,042,832 | -% | | Total | 142,812,726 | 100.0% | 150,356,539 | 100.0% | (7,543,813)| (5.0)% | - Revenue from IT consulting services decreased by 5.2% to $136.8 million in fiscal 2024, with 33.6% from international banks495 - Revenue generated outside mainland China accounted for 15.6% of total revenue in fiscal 2024, up from 10.8% in fiscal 2023, driven by strong performance in Singapore, Hong Kong SAR, and the U.S499 Gross Profit and Margin (FY2024 vs. FY2023) | Metric | FY2024 ($) | FY2023 ($) | Change ($) | Change % | | :------------ | :-------------- | :-------------- | :-------------- | :------- | | Gross Profit | 32,947,131 | 34,481,730 | (1,534,599) | (4.5)% | | Gross Margin | 23.1% | 22.9% | 0.2% | N/A | - Net loss decreased by $2.0 million (1,215.8%) to $1.8 million in fiscal 2024 from a net income of $0.2 million in fiscal 2023512 Cash Flows through Our Organization CLPS Incorporation relies on PRC subsidiary dividends for cash, subject to regulations and statutory reserves, with intercompany balances fluctuating, and PRC cash and cash equivalents at RMB 116.7 million ($16.3 million) in fiscal 2025 - CLPS Incorporation's ability to pay dividends and service debt depends on dividends from its PRC subsidiaries, subject to PRC accounting standards and regulations, including statutory reserve funds514 Cash Support to/from Subsidiaries | Fiscal Year | Due from Subsidiaries to Company ($) | Due to Subsidiaries from Company ($) | | :---------- | :----------------------------------- | :----------------------------------- | | 2025 | 34.8 million | 23.3 million | | 2024 | 36.2 million | 24.8 million | | 2023 | 24.7 million | 7.6 million | Cash and Cash Equivalents of PRC Companies | Fiscal Year | RMB (million) | USD (million) | | :---------- | :------------ | :------------ | | 2025 | 116.7 | 16.3 | | 2024 | 102.5 | 14.1 | | 2023 | 129.1 | 17.8 | Liquidity and Capital Resources As of June 30, 2025, CLPS had $28.2 million in cash and equivalents, $85.8 million in current assets, $54.4 million in current liabilities, and $57.6 million in shareholders' equity, with sufficient working capital for 12 months, though a significant portion of cash is RMB-denominated and subject to exchange controls Liquidity and Capital Resources (as of June 30, 2025) | Metric | Amount (approx.) | | :-------------------------- | :--------------- | | Cash and cash equivalents | $28.2 million | | Current assets | $85.8 million | | Current liabilities | $54.4 million | | Total shareholders' equity | $57.6 million | - Substantially all operations are conducted in China, with a majority of revenue, expenses, and cash denominated in RMB, subject to exchange control regulations517 - The company plans to fund working capital through operations, bank borrowings, and additional capital contributions from shareholders518 Operating Activities Net cash used in operating activities was $2.5 million in fiscal 2025, a shift from $8.9 million provided in fiscal 2024 and $9.7 million in fiscal 2023, primarily due to a $6.4 million net loss and increased accounts receivable Net Cash (Used in) Provided by Operating Activities | Fiscal Year | Amount ($) | | :---------- | :-------------- | | 2025 | (2,544,043) | | 2024 | 8,925,234 | | 2023 | 9,705,951 | - Net cash used in operating activities in fiscal 2025 was primarily due to a net loss of $6.4 million and negative adjustments from changes in operating assets and liabilities, including a $5.4 million increase in accounts receivable520 Investing Activities Net cash used in investing activities was $1.8 million in fiscal 2025, a significant decrease from $12.3 million in fiscal 2024, but an increase from $0.3 million in fiscal 2023, including property purchases, related party loans, and securities investments Net Cash Used in Investing Activities | Fiscal Year | Amount ($) | | :---------- | :-------------- | | 2025 | (1,754,121) | | 2024 | (12,251,016) | | 2023 | (306,046) | - Fiscal 2025 investing activities included $1.3 million for property and equipment, $2.9 million repayments from a related party, $3.0 million loans to a related party, and $1.5 million in long-term investments524 Financing Activities Net cash provided by financing activities was $2.9 million in fiscal 2025, a decrease from $10.2 million in fiscal 2024, and a reversal from $4.3 million used in fiscal 2023, including $42.9 million in bank loans, $36.2 million in loan repayments, and $3.6 million in dividend payments Net Cash Provided by (Used in) Financing Activities | Fiscal Year | Amount ($) | | :---------- | :-------------- | | 2025 | 2,900,116 | | 2024 | 10,193,143 | | 2023 | (4,319,331) | - In fiscal 2025, the company had $42.9 million in bank loans, repaid $36.2 million in loans, and paid $3.6 million in dividends527 Capital Expenditures Capital expenditures were $1.3 million in fiscal 2025, $2.1 million in fiscal 2024, and $0.5 million in fiscal 2023, primarily for office buildings and equipment, with plans for continued investment to support business growth Capital Expenditures | Fiscal Year | Amount ($) | | :---------- | :-------------- | | 2025 | 1.3 million | | 2024 | 2.1 million | | 2023 | 0.5 million | Impact of Inflation The company believes the impact of inflation on its operations is not material, with China's inflation rates stable at 0.2% in both 2024 and 2023 - The impact of inflation on the company is not material, with China's inflation rates at 0.2% in 2024 and 2023530 Contractual Obligations As of June 30, 2025, CLPS had total contractual obligations of approximately $35.0 million, primarily $4.8 million in operating leases and $30.2 million in bank loans, all due within one year Contractual Obligations (as of June 30, 2025) | Obligation | Total ($) | Less than 1 Year ($) | 1-3 Years ($) | | :------------------------ | :------------- | :------------------- | :------------ | | Operating lease arrangements | 4,782,628 | 2,999,196 | 1,783,432 | | Bank loans | 30,217,329 | 30,217,329 | - | | Total | 34,999,957 | 33,216,525 | 1,783,432 | Off-Balance Sheet Arrangements The company had no off-balance sheet arrangements or undisclosed material cash requirements for the years ended June 30, 2025, that would materially affect its financial condition or operations - There were no off-balance sheet arrangements or undisclosed material cash requirements for the years ended June 30, 2025532 Subsequent Event No subsequent events were reported - No subsequent events were reported533 Critical Accounting Policies and Estimates CLPS's critical accounting policies and estimates include revenue recognition, income taxes, business combinations, goodwill, impairment of long-lived assets, and share-based payments, requiring significant management judgments affecting reported financial amounts - Revenue from IT consulting services is recognized daily as performed, while customized IT solution services are recognized upon customer acceptance or over time537540 - Academic education service revenue from fixed tuition fees is recognized proportionately over the relevant program period544545 - Goodwill is tested for impairment at least annually, with a quantitative assessment for the IT services reporting unit in fiscal 2025 resulting in a $129,270 impairment loss, while no impairment loss was recognized for the Academic education services reporting unit550552553 ITEM 6. Directors, Senior Management and Employees This section details the company's executive officers, directors, compensation, board practices, and employee information, including the 2023 Equity Incentive Plan and Clawback Policy A. Directors and Senior Management The company's executive officers include Xiao Feng Yang (Chairman), Raymond Ming Hui Lin (CEO), Rui Yang (CFO), and Li Li (President), with independent directors Jin He Shao, Jiajia Lu, and Kee Chong Seng, all possessing extensive industry experience Executive Officers and Directors | Name | Age | Position | | :------------------ | :-- | :------------------------------------- | | Xiao Feng Yang | 62 | Chairman of the Board | | Raymond Ming Hui Lin | 61 | Chief Executive Officer and Director | | Rui Yang | 42 | Chief Financial Officer | | Li Li | 49 | President | | Jin He Shao | 58 | Independent Director (Audit Committee Chair) | | Jiajia Lu | 48 | Independent Director (Nominating Committee Chair) | | Kee Chong Seng | 73 | Independent Director (Compensation Committee Chair) | B. Compensation This section outlines annual compensation for executive officers and independent directors for fiscal years 2023-2025, details the 2023 Equity Incentive Plan authorizing up to 20,000,000 common shares for awards, and describes the Clawback Policy adopted in December 2023 Annual Compensation for Executive Officers and Directors | Name | Position | FY2025 Salary ($) | FY2024 Salary ($) | FY2023 Salary ($) | | :------------------ | :------------------- | :---------------- | :---------------- | :---------------- | | Xiao Feng Yang | Chairman of the Board | 106,011 | 104,002 | 104,651 | | Raymond Ming Hui Lin | CEO and Director | 279,486 | 202,072 | 258,614 | | Rui Yang | CFO | 193,214 | 154,908 | 152,031 | | Li Li | President | 224,061 | 189,907 | 205,359 | | Jin He Shao | Independent Director | 18,000 | 18,000 | 18,000 | | Kee Chong Seng | Independent Director | 18,000 | 18,000 | 18,000 | | Jiajia Lu | Independent Director | 18,000 | 1,500 | - | - The 2023 Equity Incentive Plan authorizes up to 20,000,000 common shares for awards (options, restricted stock, stock units, SARs) to employees, officers, directors, and consultants575579 - A Clawback Policy was adopted on December 1, 2023, allowing the company to recoup incentive compensation from Covered Executives based on erroneous financial data589 C. Board Practices The Board of Directors consists of 5 directors, with three independent directors meeting NASDAQ standards, overseeing risk management through Audit, Compensation, and Nominating committees, and directors are obligated to act honestly in the company's best interests - The Board of Directors consists of 5 directors, with Jin He Shao, Kee Chong Seng, and Jiajia Lu identified as independent directors594599 - The company maintains an Audit Committee (chaired by Jin He Shao), a Compensation Committee (chaired by Kee Chong Seng), and a Nominating Committee (chaired by Jiajia Lu), all comprised of independent directors600603604605606 - Under Cayman Islands law, directors have a duty to act honestly, in good faith, and with a view to the company's best interests, and must disclose any conflicts of interest607608 D. Employees As of June 30, 2025, CLPS had 3,534 employees, with no labor unions or collective bargaining agreements, and maintains good employee relations Number of Employees | Fiscal Year | Number of Employees | | :---------- | :------------------ | | 2025 | 3,534 | | 2024 | 3,325 | | 2023 | 3,509 | - The company has no contracts or collective bargaining agreements with labor unions and considers its relations with employees to be good611 E. Share Ownership Details on share ownership are provided in Item 7 - Details on share ownership are provided in Item 7612 ITEM 7. Major Shareholders and Related Party Transactions This section details beneficial ownership by major shareholders, directors, and executive officers, along with related party balances and transactions, including consulting services, loans, and interest income A. Major Shareholders As of October 6, 2025, CLPS had 29,743,452 common shares outstanding, with Raymond Ming Hui Lin as the largest beneficial owner at 29.02%, and all directors and executive officers as a group owning 56.41% - As of October 6, 2025, there were 29,743,452 common shares outstanding616 Major Shareholders Beneficial Ownership (as of October 6, 2025) | Name of Beneficial Owner | Common Shares | Ownership % | | :-------------------------------- | :------------ | :---------- | | Raymond Ming Hui Lin | 8,632,873 | 29.02% | | Xiao Feng Yang | 5,792,950 | 19.48% | | All directors and executive officers as a group (7 persons) | 16,777,874 | 56.41% | | Qinrui Ltd. | 4,976,000 | 16.73% | | Qinhui Ltd. | 6,999,996 | 23.53% | - There were 21 holders of record, with no U.S. residents among them619 B. Related Party Transactions CLPS has various related party balances and transactions, primarily with Fuson Group, EMIT, UniDev, and MCT, with current amounts due from related parties at $4.4 million and non-current at $1.9 million as of June 30, 2025 Related Party Balances (as of June 30) | Metric | 2025 ($) | 2024 ($) | | :-------------------------- | :---------- | :---------- | | Due from related parties, current | 4,374,595 | 3,559,109 | | Due from related parties, non-current | 1,945,960 | 2,374,298 | | Due to related parties | 21,884 | 20,230 | Related Party Transactions (FY2025) | Transaction Type | Amount ($) | | :------------------------------------ | :--------- | | Consulting services provided to related parties | 116,760 | | Services provided by related parties | 53,985 | | Loans provided to related parties | 2,984,351 | | Repayment of loans from related parties | 2,936,754 | | Interest income received from related parties | 293,103 | | Rental income from related party | 59,241 | | Other revenue from related party | 134,934 | C. Interests of Experts and Counsel Information on the interests of experts and counsel is not required - Information on the interests of experts and counsel is not required629 ITEM 8. Financial Information This section refers to Item 18 for consolidated financial statements and discusses legal proceedings, dividend policy, and significant changes A. Consolidated Statements and Other Financial Information. This sub-item directs to Item 18 for the audited consolidated financial statements - Audited consolidated financial statements are provided in Item 18630 Legal Proceedings The company is not currently involved in any legal proceedings or claims that could materially adversely affect its business - The company is not currently involved in any legal proceedings or claims that could materially adversely affect its business631 Dividend Policy The company's board declares dividends from legally available funds, with special cash dividends of $0.13, $0.10, and $0.05 per share paid in November 2024, December 2023, and January 2023, respectively, subject to PRC regulations on subsidiary distributions Special Cash Dividends Paid | Payment Date | Amount per Share ($) | | :---------------- | :------------------- | | November 24, 2024 | 0.13 | | December 13, 2023 | 0.10 | | January 10, 2023 | 0.05 | - The company's ability to pay dividends relies on distributions from its operating subsidiaries, which are subject to PRC regulations and potential restrictions on fund transfers632 B. Significant Changes No significant changes have occurred since the date of the audited consolidated financial statements, other than those disclosed in this report - No significant changes have occurred since the date of the audited consolidated financial statements, other than those disclosed in the report633 ITEM 9. The Offer and Listing This section details the company's offer and listing, including historical NASDAQ trading prices, noting that certain sub-items are not applicable A. Offer and Listing Details The company's shares have been listed on the NASDAQ Stock Market under 'CLPS' since May 24, 2018, with a closing price of $1.195 per share on October 15, 2025 - The company's common shares began trading on the NASDAQ Capital Market on May 24, 2018, under the ticker symbol 'CLPS'249637 Monthly High and Low Sale Prices (June-September 2025) | Month | High ($) | Low ($) | | :------------ | :------- | :------ | | June 2025 | 1.08 | 0.86 | | July 2025 | 1.03 | 0.68 | | August 2025 | 1.06 | 0.90 | | September 2025 | 1.09 | 0.96 | - The closing price for the company's securities on October 15, 2025, was $1.195 per share634 B. Plan of Distribution This sub-item is not applicable - This item is not applicable636 C. Markets The company's shares have been listed on the NASDAQ Stock Market under the symbol CLPS since May 24, 2018 - The company's shares have been listed on the NASDAQ Stock Market under the symbol CLPS since May 24, 2018637 D. Selling Shareholders This sub-item is not applicable - This item is not applicable638 E. Dilution This sub-item is not applicable - This item is not applicable639 F. Expenses of the Issue This sub-item is not applicable - This item is not applicable640 ITEM 10. Additional Information This section provides additional information on share capital, corporate documents, material contracts, exchange controls, and taxation in the Cayman Islands, PRC, and U.S., along with document availability A. Share Capital This sub-item is not applicable - This item is not applicable641 B. Memorandum and Articles of Association Information on Memorandum and Articles of Association is incorporated by reference from the Form F-1 registration statement filed on March 27, 2018 - Information on Memorandum and Articles of Association is incorporated by reference from the Form F-1 registration statement643 C. Material Contracts The company has not entered into any material contracts other than in the ordinary course of business or as described in Item 4 and Item 7 of this annual report - No material contracts other than in the ordinary course of business or as described in Item 4 and Item 7[644](index=644&type