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

Quarterly report pursuant to Section 13 or 15(d)

Note 12 - Debts

Note 12 - Debts

6 Months Ended

Dec. 31, 2013

Disclosure Text Block Supplement [Abstract]

Debt and Capital Leases Disclosures [Text Block]

NOTE 12 – DEBTS

Notes payable and capital leases consisted of the following:

Name			As of December 31 2013		Current Maturities		Long-Term Maturities

D&O Insurance	(1	)	$	-	$	-	$	-
Habib Bank Line of Credit	(2	)		2,445,909		2,445,909		-
Bank Overdraft Facility	(3	)		-		-		-
HSBC Loan	(4	)		973,350		331,496		641,854
Term Finance Facility	(5	)		819,173		351,074		468,099
Loan Payable Bank	(6	)		1,884,075		1,884,075		-
Subsidiary Capital Leases	(7	)		876,524		384,329		492,195
Loan From Related Party	(8	)		138,274		138,274		-
			$	7,137,305	$	5,535,157	$	1,602,148

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
Loan Payable Bank	(6	)		1,982,161		1,982,161		-
Subsidiary Capital Leases	(7	)		638,800		308,918		329,882
			$	6,720,838	$	5,308,626	$	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 December 31, 2013 and June 30, 2013, respectively. Interest paid during the three and six months ended December 31, 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 December 31, 2013 and June 30, 2013. In June 2012, the Company’s subsidiary, NTA 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 December 31, 2013 and June 30, 2013. Interest expense for the three and six months ended December 31, 2013 was $9,430 and $16,726, respectively. Interest expense for the three and six months ended December 31, 2012 was $9,770 and $13,542, 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 savings 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 $494,730. The annual interest rate is 4.25% over the bank’s sterling base rate, which was 4.75% and 5.20% as of December 31, 2013 and June 30, 2013, respectively. Interest expense, during the three and six months ended December 31, 2013, was $19,047 and $41,489, respectively. Interest expense during the three and six months ended December 31, 2012 was $27,444 and $45,968, 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 $1,649,100 for a period of 5 years with monthly payments of £18,420, or $30,376. The interest rate was 4% which is 3.5% above the bank sterling base rate. The loan is securitized against debentures 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 December 31, 2013, the subsidiary has used this facility up to $973,350, of which $641,854, was shown as long term and the remaining $331,496, as current maturity. Interest expense for the three and six months ended December 31, 2013, was $21,282 and $40,131, respectively. Interest expense for the three and six months ended December 31, 2012, was $25,091, and $46,756, 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 $1,053,223 (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 $867,195 of which $371,655 is shown as long term liabilities and the remainder of $495,540 as current maturity. As of December 31, 2013, the Company has used a total of Rs.87,500,000, or $819,173, of which $468,099, is shown as long term liabilities and the remainder of $351,074, as current maturity. Interest expense during the three and six months ended December 31, 2013 was $24,886 and $47,009, respectively. Interest expense during the three and six months ended December 31, 2012 was $49,031 and $70,696, respectively.

(6) 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 December 31, 2013 and June 30, 2013 was $1,884,075, and $1,982,161, respectively. The interest rate for the loans was 9.40% at December 31, 2013 and June 30, 2013. Interest expense for the three and six months ended December 31, 2013, was $42.081 and $86,181, respectively. Interest expense for the three and six months ended December 31, 2012 was $36,640 and $94,046, respectively.

(7) 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 and six months ended December 31, 2013 and 2012.

Following is the aggregate minimum future lease payments under capital leases as of December 31, 2013:

	As of December 31, 2013
Minimum Lease Payments
Due FYE 12/31/14	$	463,957
Due FYE 12/31/15		336,110
Due FYE 12/31/16		178,641
Due FYE 12/31/17		29,081
Total Minimum Lease Payments		1,007,789
Interest Expense relating to future periods		(131,265	)
Present Value of minimum lease payments		876,524
Less: Current portion		(384,329	)
Non-Current portion	$	492,195

Interest expense for the three and six months ended December 31, 2013 was $21,054 and $40,034, respectively. Interest expense for the three and six months ended December 31, 2012 was $55,835, and $74,456, respectively.

(8) In October 2013, the Company’s subsidiary, NTE, entered into a loan agreement with Investec a related party to finance VLS. The loan amount was £100,000, or $164,910, for a period of 1 year with monthly payments of £8,676, or $14,307. The interest rate was 4.1%. As of December 31, 2013, the subsidiary has used this facility up to $138,274 and was shown as current maturity. Interest expense, for the three and six months ended December 31, 2013, was $1,901.