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, 2012

Debt and Capital Leases Disclosures [Text Block]

NOTE 13 – DEBTS

(A)	Loans and Leases Payable

Notes and leases payable consisted of the following:

	As of June 30		Current		Long-Term
Name	2012		Maturities		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		264,550		793,651
Subsidiary Capital Leases		832,801		572,694		260,107
	$	3,707,886	$	1,631,687	$	2,076,199

	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 0.42% and 0.49% as of June 30, 2012 and 2011, respectively. Interest paid during the period ended June 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% and 2% as of June 30, 2012 and 2011, respectively. Interest paid during the year ended June 30, 2012 and 2011 was $41,140 and $118,148, respectively. During the period ended June 30, 2012, the Company redeemed its certificates of deposits and paid off the majority of line of credit.

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 1.99% as of June 30, 2012. No interest was paid during the year as line of credit was unused by the end of June 30, 2012.

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 5.00% as of June 30, 2012 and 2011, respectively.

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 $1,561,700 for a period of 5 years with monthly payments of £18,420, or $28,767 approximately. The interest rate was 4% which is 3.5% above bank sterling base rate. The subsidiary has used this facility up to £875,741, or $1,367,644, of which £654,698, or $1,022,441, was shown as long term and remaining £221,043, or $345,203, as current maturity. Interest expense, for the period ended June 30, 2012, was £29,184, or $36,744.

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. 162,500,000 or approximately $1,719,577 (secured by the first charge of Rs. 580 million or approximately $6.13 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 $869,767 of which $434,484 was shown as long term liabilities and the remainder of $434,483 as current maturity. As of the year ended June 30, 2012, the Company has used 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.

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, 2012 and 2011.

Following is the aggregate minimum future lease payments under capital leases for the years-ended June 30, 2012 and 2011:

	As of June 30			As of June 30
	2012			2011
Minimum Lease Payments
Due FYE 6/30/12	$	-		$	1,010,836
Due FYE 6/30/13		629,251			209,260
Due FYE 6/30/14		215,953			115,346
Due FYE 6/30/15		71,218			-
Total Minimum Lease Payments		916,422			1,335,442
Interest Expense relating to future periods		(83,621	)		(102,857	)
Present Value of minimum lease payments		832,801			1,232,585
Less: Current portion		(572,694	)		(947,113	)
Non-Current portion	$	260,107		$	285,472

Following is a summary of property and equipment held under capital leases as of June 30, 2012 and 2011:

	As of June 30			As of June 30
	2012			2011
Computer Equipment and Software	$	702,637		$	518,911
Furniture and Fixtures		403,439			769,106
Vehicles		468,853			434,049
Building Equipment		302,216			302,216

Total		1,877,145			2,024,282
Less: Accumulated Depreciation		(900,790	)		(807,562	)
Net	$	976,355		$	1,216,720

Interest expense for the year ended June 30, 2012 and 2011 was $69,236 and $46,720, respectively.

(B)	Loans Payable – Bank

The Company’s subsidiary, NetSol Technologies Limited, has a loan with a bank, secured by the Company’s assets. This loan consisted of the following as of June 30, 2012 & 2011:

For the year ended June 30, 2012:


TYPE OF	MATURITY	INTEREST			BALANCE
LOAN	DATE	RATE			USD

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

Total					$	2,116,402

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