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

3 Months Ended

Sep. 30, 2011

Debt and Capital Leases Disclosures [Text Block]

NOTE 12 - DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

	As of September 30		Current		Long-Term
Name	2011		Maturities		Maturities

Habib Bank Line of Credit	$	2,583,594		2,583,594		-
Bank Overdraft Facility		288,475		288,475		-
Term Finance Facility		709,260		283,704		425,556
Subsidiary Capital Leases		1,194,686		936,975		257,711
Lease abandonment liability		-		-		-
	$	4,776,014	$	4,092,747	$	683,267


	As of June 30		Current		Long-Term
Name		2011	Maturities		Maturities

D&O Insurance	$	21,429	$	21,429	$	-
Habib Bank Line of Credit		5,404,608		5,404,608		-
Bank Overdraft Facility		254,502		254,502		-
Term Finance Facility		869,767		434,883		434,884
Subsidiary Capital Leases		1,232,585		947,113		285,472
	$	7,782,891	$	7,062,535	$	720,356

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 0.49% as of September 30, 2011 and June 30, 2011. Interest paid during the period-ended September 30, 2011 and 2010 was nominal.

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 2% as of September 30, 2011 and June 30, 2011, respectively. Interest expense for the three months ended September 30, 2011 and 2010 was $20,114 and $40,123, respectively. During the quarter ended September 30, 2011, the company redeemed certificate of deposits worth $3 million. Consequently, the line of credit was also reduced to $2,583,594.

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, approximately $312,560. The annual interest rate is 3.25% over the bank’s sterling base rate, which was 5.00% as of September 30, 2011 and June 30, 2011, respectively.

The Company’s subsidiary, NetSol PK, entered into a term finance facility from Askari Bank to finance the construction of a new building. The total amount of the facility is Rs. 200,000,000 or approximately $2,269,632 (secured by the first charge of Rs. 580 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 on June 30, 2011, the subsidiary had used Rs. 75,000,000 or approximately $851,112 of which $425,556 was shown as long term liabilities and the remainder of $425,556 as current maturity. As of the three months ended September 30, 2011, the Company paid back another installment of Rs. 12,500,000 reducing the outstanding principal amount to Rs. 62,500,000 or approximately $709,260 of which $425,556 is shown as long term liabilities and the remainder of $283,704 as current maturity. Interest expense for the three months ended September 30, 2011 and 2010 was $35,091 and $44,170, respectively which was capitalized by the company.

The Company leases various fixed assets under capital lease arrangements expiring in various years through 2015. 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, 2011 and 2010.

Following is the estimated aggregate minimum future lease payments under capital leases:

	As of September 30			As of June 30
	2011			2011
Minimum Lease Payments
Due FYE 9/30/11	$	-		$	1,010,836
Due FYE 9/30/12		995,967			209,260
Due FYE 9/30/13		208,513			115,346
Due FYE 9/30/14		80,910			-
Due FYE 9/30/15		-			-
Total Minimum Lease Payments		1,285,389			1,335,442
Interest Expense relating to future periods		(90,703	)		(102,856	)
Present Value of minimum lease payments		1,194,686			1,232,585
Less: Current portion		(936,975	)		(947,113	)
Non-Current portion	$	257,711		$	285,472

Following is a summary of fixed assets held under capital leases:

	As of September 30			As of June 30
	2011			2011
Computer Equipment and Software	$	552,905		$	518,911
Furniture and Fixtures		767,579			769,106
Vehicles		452,451			434,049
Building Equipment		302,216			302,216
Total		2,075,151			2,024,282
Less: Accumulated Depreciation		(905,411	)		(807,562	)
Net	$	1,169,740		$	1,216,720

Interest expense for the three months ended September 30, 2011 and 2010 was $18,688 and $8,790, respectively.

(B) LOANS PAYABLE- BANK

The Company’s subsidiary, NetSol PK, has a loan with a bank, secured by the company’s assets. This loan consisted of the following:

For the year ended September 30, 2011:
TYPE OF	MATURITY	INTEREST			BALANCE
LOAN	DATE	RATE			USD

Export Refinance	Every 6 months		11.00	%	$	2,269,632
Total					$	2,269,632


For the year ended June 30, 2011:
TYPE OF	MATURITY	INTEREST			BALANCE
LOAN	DATE	RATE			USD

Export Refinance	Every 6 months		11.00	%	$	2,319,378
Total					$	2,319,378

Interest expense for the three months ended September 30, 2011 and 2010 was $19,776 and $51,812, respectively.

On June 30, 2006, the Company acquired McCue Systems, Inc. (“McCue”), a California corporation (subsequently renamed as NetSol Technologies North America, Inc.) The total purchase price was $7,080,385, including $3,784,635 of cash and 1,712,332 shares of the Company’s common stock. Of the total purchase price, the accompanying consolidated financial statements include certain amounts payable to McCue shareholders that have not been located as of the date of this report.

As of the period-ended September 30, 2011 and June 30, 2011, the remaining cash due of $103,226 is shown as “Other Payable – Acquisition” and the remaining stock to be issued of 46,704 shares at an average price of $1.89 is shown in “Shares to be issued” in the accompanying consolidated financial statements. Amounts payable represent the remaining McCue shareholders that have not been located as of the date of this report.