NETSOL Technologies, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 12 - Debt

Note 12 - Debt

3 Months Ended

Sep. 30, 2013

Disclosure Text Block Supplement [Abstract]

Debt and Capital Leases Disclosures [Text Block]

NOTE 12 – DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

Name			As of September 30 2013		Current Maturities		Long-Term Maturities

D&O Insurance	(1	)	$	44,411	$	44,411	$	-
Habib Bank Line of Credit	(2	)		2,211,822		2,211,822		-
Bank Overdraft Facility	(3	)		420,231		420,231		-
HSBC Loan	(4	)		1,032,253		321,270		710,983
Term Finance Facility	(5	)		703,103		351,552		351,551
Subsidiary Capital Leases	(6	)		665,359		311,102		354,257
			$	5,077,179	$	3,660,388	$	1,416,791

Name			As of June 30 2013		Current Maturities		Long-Term Maturities

D&O Insurance	(1	)	$	88,292	$	88,292	$	-
Habib Bank Line of Credit	(2	)		1,785,237		1,785,237		-
Bank Overdraft Facility	(3	)		312,139		312,139		-
HSBC Loan	(4	)		1,047,014		336,339		710,675
Term Finance Facility	(5	)		867,195		495,540		371,655
Subsidiary Capital Leases	(6	)		638,800		308,918		329,882
			$	4,738,677	$	3,326,465	$	1,412,212

(1) The Company finances Directors’ and Officers’ (“D&O”) liability insurance as well as Errors and Omissions (“E&O”) liability insurance, for which the total balances are renewed on an annual basis and as such are recorded in current maturities. The interest rate on the insurance financing was 0.40% and 0.40% as of September 30, 2013 and June 30, 2013, respectively. Interest paid during the three months ended September 30, 2013 and 2012 was nominal.

(2) In April 2008, the Company entered into an agreement with Habib American Bank to secure a line of credit to be collateralized by Certificates of Deposit held at the bank. The interest rate on this line of credit is variable and was 1.5% as of September 30, 2013 and June 30, 2013, respectively. In June 2012, the Company’s subsidiary, NTNA entered into an agreement with Habib American Bank to secure a line of credit up to $500,000 to be collateralized by Certificates of Deposit of same value held at the bank. The interest rate on this line of credit is variable and was 1.90% as of September 30, 2013 and June 30, 2013, respectively. Interest expense during the three months ended September 30, 2013 and 2012 was $7,296 and $3,772, respectively.

In February 2012, the Company entered into agreement with HSBC for the issuance of stand by letter of credit worth $90,000 in favor of landlord against the new office space. The Company has deposited $90,000 in a saving account with HSBC as collateral against this letter of credit.

(3) During the year ended June 30, 2008, the Company’s subsidiary, NTE entered into an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £300,000, or approximately $484,290. The annual interest rate is 4.25% over the bank’s sterling base rate, which was 4.75% and 5.20% as of September 30, 2013 and June 30, 2013, respectively. Interest expense during the three months ended September 30, 2013 and 2012 was $22,442 and $18,524, respectively.

(4) In October 2011, the Company’s subsidiary, NTE, entered into a loan agreement with HSBC Bank to finance the acquisition of 51% of controlling interest in Virtual Leasing Services Limited. HSBC Bank guaranteed the loan up to a limit of £1,000,000, or approximately $1,614,300 for a period of 5 years with monthly payments of £18,420, or approximately $29,735. The interest rate was 4% which is 3.5% above the bank sterling base rate. The loan is securitized against debenture comprising of fixed and floating charges over all the assets and undertakings of NTE including all present and future freehold and leasehold property, book and other debts, chattels, goodwill and uncalled capital, both present and future. As of June 30, 2013, the subsidiary has used this facility up to $1,047,015, of which $710,675, was shown as long term and the remaining $336,339, as current maturity. As of September 30, 2013, the subsidiary has used this facility up to $1,032,253, of which $710,983, was shown as long term and the remaining $321,270, as current maturity. Interest expense, for the three months ended September 30, 2013 and 2012, was $18,849, and $21,665, respectively.

(5) The Company’s subsidiary, NetSol PK, entered into two different term finance facilities from Askari Bank to finance the construction of a new building. The total aggregate amount of these facilities is Rs. 112,500,000 or approximately $1,054,655(secured by the first charge of Rs. 580 million or approximately $5.44 million over the land, building and equipment of the company). The interest rate is 2.75% above the six-month Karachi Inter Bank Offering Rate. As of the year ended June 30, 2013, the Company has used a total of Rs.87,500,000 or approximately $867,195 of which $371,655 is shown as long term liabilities and the remainder of $495,540 as current maturity. As of September 30, 2013, the company has used a total of Rs.75,000,000, or approximately $703,103, of which $351,551, is shown as long term liabilities and the remainder of $351,552, as current maturity. Interest expense during the three months ended September 30, 2013 and 2012 was $22,123 and $37,202, respectively.

(6) The Company leases various fixed assets under capital lease arrangements expiring in various years through 2018. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are depreciated over the lesser of their related lease terms or their estimated useful lives and are secured by the assets themselves. Depreciation of assets under capital leases is included in depreciation expense for the three months ended September 30, 2013 and 2012.

Following is the aggregate minimum future lease payments under capital leases as of September 30, 2013:

	As of September 30, 2013
Minimum Lease Payments
Due FYE 9/30/14	$	368,052
Due FYE 9/30/15		247,621
Due FYE 9/30/16		105,153
Due FYE 9/30/17		37,957
Total Minimum Lease Payments		758,783
Interest Expense relating to future periods		(93,424	)
Present Value of minimum lease payments		665,359
Less: Current portion		(311,102	)
Non-Current portion	$	354,257

Following is a summary of fixed assets held under capital leases as of September 30, 2013 and June 30, 2013:

	As of September 30, 2013			As of June 30, 2013
Computer Equipment and Software	$	533,813		$	454,002
Furniture and Fixtures		900			951
Vehicles		675,816			671,907
Total		1,210,529			1,126,860
Less: Accumulated Depreciation		(380,738	)		(350,048	)
Net	$	829,791		$	776,812

Interest expense for the three months ended September 30, 2013 and 2012 was $18,980, and $18,621, respectively.

(B) LOANS PAYABLE - BANK

The Company’s subsidiary, NetSol PK, has a loan with Askari Bank Limited, secured by the Company’s assets. This is a revolving loan that matures every six months. The balance of the loan at September 30, 2013 and June 30, 2013 was $1,874,941, and $1,982,161, respectively. The interest rate for the loans was 9.40% and 9.40% at September 30, 2013 and June 30, 2013, respectively. Interest expense for the three months ended September 30, 2013, and 2012 was $44,100 and $57,406, respectively.