|12 Months Ended|
Jun. 30, 2017
|Debt Disclosure [Abstract]|
NOTE 14 – DEBTS
Notes and leases payable consisted of the following:
(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 these financings range from 4.8% to 7.69% and from 4.25% to 5.89% as of June 30, 2017 and 2016, respectively.
(2) The Company’s subsidiary, NTE, has an overdraft facility with HSBC Bank plc whereby the bank would cover any overdrafts up to £300,000, or approximately $389,610. The annual interest rate was 4.75% as of June 30, 2017. Total outstanding balance as of June 30, 2017 was £170,462 or approximately $221,379. Interest expense for year ended June 30, 2017 was $9,077.
This overdraft facility requires that the aggregate amount of invoiced trade debtors (net of provisions for bad and doubtful debts and excluding intra-group debtors) of NTE, not exceeding 90 days old, will not be less than an amount equal to 200% of the facility. As of June 30, 2017, NTE was in compliance with this covenant.
(3) In October 2011, the Company’s subsidiary, NTE, entered into a loan agreement with HSBC Bank to finance the acquisition of 51% of a controlling interest in Virtual Leasing Services Limited. HSBC Bank guaranteed the loan up to a limit of £1,000,000, or approximately $1,298,701 for a period of 5 years with monthly payments of £18,420, or approximately $23,922. 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. Interest expense for the years ended June 30, 2017 and 2016 was $2,243 and $12,846, respectively. NTE paid this loan in full during the year ended June 30, 2017.
(4) The Company’s subsidiary, NetSol PK, has an export refinance facility with Askari Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every six months. Total facility amount is Rs. 500,000,000 or $4,776,461 and Rs. 400,000,000 or $3,792,907, respectively. The interest rate for the loans was 3% and 4.5% at June 30, 2017 and 2016, respectively. Interest expense for the year ended June 30, 2017 and 2016 was $121,306 and $148,475, respectively.
This facility requires NetSol PK to maintain a long term debt equity ratio of 60:40 and the current ratio of 1:1. As of June 30, 2017, NetSol PK was in compliance with this covenant.
(5) During the fiscal year, the Company’s subsidiary, NetSol PK, availed an export refinance facility with Samba Bank Limited, of Rs. 200,000,000 or $1,910,585, secured by NetSol PK’s assets. This is a revolving loan that matures every six months. The interest rate for the loans was 3% at June 30, 2017. Interest expense for the year ended June 30, 2017 was $2,511.
(6) During the fiscal year, the Company’s subsidiary, NetSol PK, availed a running finance facility of Rs. 300,000,000 or $2,865,877 from Samba Bank Limited. The interest rate for the loans was 8.13% at June 30, 2017. Interest expense for the year ended June 30, 2017 was $78,251.
The facilities from Samba Bank Limited require NetSol PK to maintain at minimum of current ratio of 1:1, Interest coverage ratio 4 times, Leverage 2 times and Debt Service Coverage Ratio 4 times during the tenure of loan. As of June 30, 2017, NetSol PK was in compliance with these covenants.
(7) The Company leases various fixed assets under capital lease arrangements expiring in various years through 2022. 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, 2017 and 2016.
Following is the aggregate minimum future lease payments under capital leases for the year ended June 30, 2017:
The entire disclosure for debt and capital lease obligations can be reported. Information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. Also includes descriptions and amounts of capital leasing arrangements that consist of direct financing, sales type and leveraged leases. Disclosure may include the effect on the balance sheet and the income statement resulting from a change in lease classification for leases that at inception would have been classified differently had guidance been in effect at the inception of the original lease.
Reference 1: http://www.xbrl.org/2003/role/presentationRef