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, 2012

Debt and Capital Leases Disclosures [Text Block]

NOTE 12 - DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

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

D&O Insurance	$	45,280	$	45,280	$	-
Habib Bank Line of Credit		1,629,382		1,629,382		-
Bank Overdraft Facility		389,560		389,560		-
HSBC Loan		1,340,630		357,404		983,226
Term Finance Facility		915,655		392,424		523,231
Subsidiary Capital Leases		920,150		616,569		303,581
	$	5,240,657	$	3,430,619	$	1,810,038


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

D&O Insurance	$	89,996	$	89,996	$	-
Habib Bank Line of Credit		51,231		51,231		-
Bank Overdraft Facility		308,013		308,013		-
HSBC Loan		1,367,644		345,203		1,022,441
Term Finance Facility		1,058,201		529,101		529,100
Subsidiary Capital Leases		832,801		572,694		260,107
	$	3,707,886	$	1,896,238	$	1,811,648

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 0.42% and 0.42% as of September 30 and June 30, 2012, respectively. Interest paid during the period ended September 30, 2012 and 2011 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 1.99% as of September 30 and June 30, 2012, respectively.

Interest expense during the three months ended September 30, 2012 and 2011 was $3,208 and $20,114, respectively.

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 1.99% as of June 30, 2012. Interest expense during the three months ended September 30, 2012 was $564.

The amount mentioned above, represents combine outstanding balance payable to Habib American Bank.

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 January 2011, 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 $323,380. The agreement was later revised in July 2012 whereby the limit was increased to £300,000 or $485,070 approximately until September 30, 2012 whereby it again reverts to £200,000 or $323,380 until December 2012. The annual interest rate is 4.25% over the bank’s sterling base rate, which was 0.5% as of September 30 and June 30, 2012, respectively. Total outstanding balance as of September 30, 2012 was £240,930 or $389,560 approximately.

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 $1,616,900 for a period of 5 years with monthly payments of £18,420, or $29,783 approximately. The interest rate was 4% which is 3.5% above bank sterling base rate. The subsidiary has used this facility up to £829,135, or $1,340,630, of which £608,093, or $983,226, was shown as long term and remaining £221,043, or $357,404, as current maturity. Interest expense, for the period ended September 30, 2012, was £13,714, or $21,665.

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 aggregate amount of these facilities is Rs. 162,500,000 or approximately $1,700,502 approximately (secured by the first charge of Rs. 580 million or approximately $6.07 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 June 30, 2012, the subsidiary had used Rs. 100,000,000 or approximately $1,046,464 of which $523,232 was shown as long term liabilities and the remainder of $523,232 as current maturity. As of the period ended September 30, 2012, the company has used a total of Rs. 87,500,000 or approximately $915,655 of which $523,231 is shown as long term liabilities and the remainder of $392,424 as current maturity.

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 three months ended September 30, 2012 and 2011.

Following is the aggregate minimum future lease payments under capital leases as of September 30 and June 30, 2012:

	As of September 30 2012			As of June 30 2012
Minimum Lease Payments
Due FYE 9/30/12	$	-		$	629,251
Due FYE 9/30/13		682,882			215,953
Due FYE 9/30/14		236,056			71,218
Due FYE 9/30/15		99,123			-
Total Minimum Lease Payments		1,018,061			916,422
Interest Expense relating to future periods		(97,911	)		(83,621	)
Present Value of minimum lease payments		920,150			832,801
Less: Current portion		(616,569	)		(572,694	)
Non-Current portion	$	303,581		$	260,107

Following is a summary of fixed assets held under capital leases as of September 30 and June 30, 2012:

	As of September 30 2012			As of June 30 2012
Computer Equipment and Software	$	749,891		$	702,637
Furniture and Fixtures		403,428			403,439
Vehicles		609,989			468,853
Building Equipment		302,216			302,216

Total		2,065,524			1,877,145
Less: Accumulated Depreciation		(970,941	)		(900,790	)
Net	$	1,094,583		$	976,355

Interest expense for the three months ended September 30, 2012 and 2011 was $18,621 and $18,688, 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 consists of the following as of September 30 and June 30, 2012:

For the year ended September 30, 2012:

TYPE OF LOAN	MATURITY DATE	INTEREST RATE			BALANCE USD

Export Refinance	Every 6 months		11.00	%	$	2,092,926

Total					$	2,092,926

For the year ended June 30, 2012:

TYPE OF LOAN	MATURITY DATE	INTEREST RATE			BALANCE USD

Export Refinance	Every 6 months		11.00	%	$	2,116,402

Total					$	2,116,402

Interest expense for the three months ended September 30, 2012, and 2011 was $57,406 and $62,920, respectively.