NETSOL Technologies, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Note 13 - Debt

Note 13 - Debt

12 Months Ended

Jun. 30, 2013

Disclosure Text Block Supplement [Abstract]

Debt and Capital Leases Disclosures [Text Block]

NOTE 13 – DEBTS

(A)	Loans and Leases Payable

Notes and leases payable consisted of the following:

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

Name				As of June 30 2012	Current Maturities		Long-Term Maturities

D&O Insurance	(1	)	$	89,996	$	89,996	$	-
Habib Bank Line of Credit	(2	)		51,231		51,231		-
Bank Overdraft Facility	(3	)		308,013		308,013		-
HSBC Loan	(4	)		1,367,644		345,203		1,022,441
Term Finance Facility	(5	)		1,058,201		264,550		793,651
Subsidiary Capital Leases	(6	)		832,801		572,694		260,107
			$	3,707,886	$	1,631,687	$	2,076,199

(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 0.42% as of June 30, 2013 and 2012, respectively. Interest paid during the periods ended June 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% and 1.99% as of June 30, 2013 and 2012, respectively. Interest paid during the years ended June 30, 2013 and 2012 was $26,702 and $41,140, 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.

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 1.5% and 1.99% as of June 30, 2013 and 2012 respectively. Interest paid during the years ended June 30, 2013 and 2012 was $3,341 and Nil, respectively.

(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 £200,000, or approximately $312,340. The annual interest rate is 4.7% over the bank’s sterling base rate, which was 5.2% and 5.20% as of June 30, 2013 and 2012, 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 $1,521,600 for a period of 5 years with monthly payments of £18,420, or approximately $28,028. The interest rate was 4% which is 3.5% above the bank sterling base rate. The loan is securitized agaisnt debenture comprising of fixed and floating charges over all the assets and undertaking 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, 3012, the subsidiary had used this facility up to $1,367,644, of which $1,022,441, was shown as long term and the remaining $345,203, as current maturity. 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. Interest expense, for the years ended June 30, 2013 and 2012, was $81,347 and $36,744, 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 are Rs. 112,500,000 or approximately $1,114,965(secured by the first charge of Rs. 580 million or approximately $5.75 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, 2012, the Company has used a total of Rs. 100,000,000 or approximately $1,058,201 of which $793,651 is shown as long term liabilities and the remainder of $264,550 as current maturity. 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.

Following table represents future payments of loans described in above sub notes 1 to 5

	As of June 30, 2013
Loan Payments
Due FYE 6/30/14	$	2,981,014
Due FYE 6/30/15		559,818
Due FYE 6/30/16		448,673
Due FYE 6/30/17		110,372
Total Loan Payments		4,099,877
Less: Current portion		(3,017,547	)
Non-Current portion	$	1,082,330

(6) The Company leases various fixed assets under capital lease arrangements expiring in various years through 2016. 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 years ended June 30, 2013 and 2012.

Following is the aggregate minimum future lease payments under capital leases for the year-ended June 30, 2013:

	As of June 30, 2013
Minimum Lease Payments
Due FYE 6/30/14	$	364,325
Due FYE 6/30/15		231,434
Due FYE 6/30/16		86,368
Due FYE 6/30/17		11,926
Due FYE 6/30/18		35,777
Total Minimum Lease Payments		729,830
Interest Expense relating to future periods		(91,030	)
Present Value of minimum lease payments		638,800
Less: Current portion		(308,918	)
Non-Current portion	$	329,882

Following is a summary of property and equipment held under capital leases as of June 30, 2013 and 2012:

	As of June 30, 2013			As of June 30, 2012
Computer Equipment and Software	$	454,002		$	702,637
Furniture and Fixtures		951			403,439
Vehicles		671,907			468,853
Building Equipment		-			302,216
Total		1,126,860			1,877,145
Less: Accumulated Depreciation		(350,048	)		(900,790	)
Net	$	776,812		$	976,355

Interest expense for the years ended June 30, 2013 and 2012 was $79,098 and $69,236, respectively.

(B)	Loans Payable – Bank

The Company’s subsidiary, NetSol PK, has a loan with a bank, secured by the Company’s assets. The loan is a revolving loan that matures every six months. The balance of the loan at June 30, 2013 and 2012 was $1,982,161 and $2,116,402, respectively. The interest rate for the loans was 9.40% and 11.00% at June 30, 2013 and 2012, respectively. Interest expense for the years ended June 30, 2013, and 2012 was $180,407 and $228,875, respectively.