DEBTS

6 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

DEBTS

NOTE 15 – DEBTS

Notes payable and finance leases consisted of the following:

			As of December 31, 2022
					Current		Long-Term
Name			Total		Maturities		Maturities
D&O Insurance	(1	)	$	127,599	$	127,599	$	-
Bank Overdraft Facility	(2	)		-		-		-
Term Finance Facility	(3	)		-		-		-
Loan Payable Bank - Export Refinance	(4	)		2,208,285		2,208,285		-
Loan Payable Bank - Running Finance	(5	)		-		-		-
Loan Payable Bank - Export Refinance II	(6	)		1,678,297		1,678,297		-
Loan Payable Bank - Export Refinance III	(7	)		3,091,600		3,091,600		-
Sale and Leaseback Financing	(8	)		463,011		172,983		290,028
Term Finance Facility	(9	)		21,908		18,682		3,226
Insurance Financing	(10	)		54,405		54,405		-
				7,645,105		7,351,851		293,254
Subsidiary Finance Leases	(11	)		48,590		34,899		13,691
			$	7,693,695	$	7,386,750	$	306,945

			As of June 30, 2022
					Current		Long-Term
Name			Total		Maturities		Maturities
D&O Insurance	(1	)	$	89,552	$	89,552	$	-
Bank Overdraft Facility	(2	)		-		-		-
Term Finance Facility	(3	)		423,101		423,101		-
Loan Payable Bank - Export Refinance	(4	)		2,434,749		2,434,749		-
Loan Payable Bank - Running Finance	(5	)		-		-		-
Loan Payable Bank - Export Refinance II	(6	)		1,850,409		1,850,409		-
Loan Payable Bank - Export Refinance III	(7	)		3,408,648		3,408,648		-
Sale and Leaseback Financing	(8	)		619,108		189,226		429,882
Term Finance Facility	(9	)		31,204		18,339		12,865
Insurance Financing	(10	)		118,026		118,026		-
				8,974,797		8,532,050		442,747
Subsidiary Finance Leases	(11	)		68,571		35,095		33,476
			$	9,043,368	$	8,567,145	$	476,223

(1) The Company finances Directors’ and Officers’ (“D&O”) liability insurance and Errors and Omissions (“E&O”) liability insurance, for which the D&O and E&O balances are renewed on an annual basis and, as such, are recorded in current maturities. The interest rate on these financings were ranging from 5.0% to 7.0% as of December 31, 2022 and June 30, 2022.

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

December 31, 2022

(Unaudited)

(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 $361,446. The annual interest rate was 5.5% as of December 31, 2022. The total outstanding balance as of December 31, 2022 and June 30, 2022 was £Nil.

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 December 31, 2022, NTE was in compliance with this covenant.

(3) The Company’s subsidiary, NetSol PK, has a term finance facility from Askari Bank Limited, approved by the Government of Pakistan to protect the employment situation during the COVID-19 pandemic. This is a term loan payable in three years. The availed facility amount was Rs. nil or $nil, at December 31, 2022. The availed facility amount is Rs. 86,887,974 or $423,101, at June 30, 2022, which is shown as current. The interest rate for the loan was 3% at December 31, 2022 and June 30, 2022.

(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 nine months. The total facility amount is Rs. 500,000,000 or $2,208,285 at December 31, 2022 and Rs. 500,000,000 or $2,434,749 at June 30, 2022. The interest rate for the loan was 10% and 3% at December 31, 2022 and June 30, 2022, respectively.

(5) The Company’s subsidiary, NetSol PK, has a running finance facility with Askari Bank Limited, secured by NetSol PK’s assets. The total facility amount is Rs. 53,000,000 or $236,728, at December 31, 2022. The balance outstanding at December 31, 2022 and June 30, 2022 was Rs. Nil. The interest rate for the loan was 19.0% and 14.0% at December 31, 2022 and June 30, 2022, 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 December 31, 2022, NetSol PK was in compliance with this covenant.

(6) The Company’s subsidiary, NetSol PK, has an export refinance facility with Samba Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every nine months. The total facility amount is Rs. 380,000,000 or $1,678,297 and Rs. 380,000,000 or $1,850,409 at December 31, 2022 and June 30, 2022, respectively. The interest rate for the loan was 10% and 3% at December 31, 2022 and June 30, 2022, respectively.

During the tenure of the loan, the facilities from Samba Bank Limited require NetSol PK to maintain at a minimum a current ratio of 1:1, an interest coverage ratio of 4 times, a leverage ratio of 2 times, and a debt service coverage ratio of 4 times. As of December 31, 2022, NetSol PK was in compliance with these covenants.

(7) The Company’s subsidiary, NetSol PK, has an export refinance facility with Habib Metro Bank Limited, secured by NetSol PK’s assets. This is a revolving loan that matures every nine months. The total facility amount is Rs. 900,000,000 or $3,974,914 and Rs. 900,000,000 or $4,382,548, at December 31, 2022 and June 30, 2022, respectively. NetSol PK used Rs. 700,000,000 or $3,091,600 and Rs. 700,000,000 or $3,408,648, at December 31, 2022 and June 30, 2022, respectively. The interest rate for the loan was 10% and 3% at December 31, 2022 and June 30, 2022, respectively.

(8) The Company’s subsidiary, NetSol PK, availed sale and leaseback financing from First Habib Modaraba secured by the transfer of the vehicles’ title. As of December 31, 2022, NetSol PK used Rs. 104,834,901 or $463,011 of which $290,028 was shown as long term and $172,983 as current. As of June 30, 2022, NetSol PK used Rs. 127,140,038 or $619,108 of which $429,882 was shown as long term and $189,226 as current. The interest rate for the loan was 9.0% to 16.0% at December 31, 2022, and June 30, 2022.

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

December 31, 2022

(Unaudited)

(9) In March 2019, the Company’s subsidiary, VLS, entered into a loan agreement. The loan amount was £69,549, or $83,794, for a period of 5 years with monthly payments of £1,349, or $1,625. As of December 31, 2022, the subsidiary has used this facility up to $21,907, of which $3,226 was shown as long-term and $18,681 as current. As of June 30, 2022, the subsidiary has used this facility up to $31,204, of which $12,865 was shown as long-term and $18,339 as current. The interest rate was 6.14% at December 31, 2022 and June 30, 2022.

(10) The Company’s subsidiary, VLS, finances Directors’ and Officers’ (“D&O”) liability insurance, and the $54,405 and $96,781 was recorded in current maturities, at December 31, 2022 and June 30, 2022, respectively. The interest rate on this financing ranged from 9.7% to 12.7% as of December 31, 2022 and June 30, 2022.

(11) The Company leases various fixed assets under finance lease arrangements expiring in various years through 2025. The assets and liabilities under finance 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 secured by the assets themselves. Depreciation of assets under finance leases is included in depreciation expense for the three and six months ended December 31, 2022 and 2021.

Following are the aggregate minimum future lease payments under finance leases as of December 31, 2022:

	Amount
Minimum Lease Payments
Within year 1	$	39,033
Within year 2		14,514
Total Minimum Lease Payments		53,547
Interest Expense relating to future periods		(4,957	)
Present Value of minimum lease payments		48,590
Less: Current portion		(34,899	)
Non-Current portion	$	13,691

Following are the aggregate future long term debt payments as of December 31, 2022

	Amount
Loan Payments
Within year 1	$	191,664
Within year 2		188,283
Within year 3		104,972
Total Loan Payments		484,919
Less: Current portion		(191,665	)
Non-Current portion	$	293,254

NETSOL TECHNOLOGIES, INC.

Notes to Condensed Consolidated Financial Statements

December 31, 2022

(Unaudited)