NETSOL Technologies, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Note 13 - Debts

Note 13 - Debts

6 Months Ended

Dec. 31, 2012

Debt and Capital Leases Disclosures [Text Block]

NOTE 13 - DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

	As of December 31		Current		Long-Term
Name	2012		Maturities		Maturities

Habib Bank Line of Credit	$	2,308,659	$	2,308,659	$	-
HSBC Loan		1,267,743		357,382		910,361
Term Finance Facility		897,436		512,821		384,615
Subsidiary Capital Leases		571,376		294,555		276,821
	$	5,045,214	$	3,473,417	$	1,571,797

	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

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 December 31 and June 30, 2012, respectively. Interest paid during the period ended December 31, 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 December 31 and June 30, 2012, respectively.

Interest expense during the six months ended December 31, 2012 and 2011 was $11,422 and $32,131, 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 December 31, 2012 and June 30, 2012 respectively. Interest expense during the six months ended December 31, 2012 was $2,120.

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 $323,360. The agreement was later revised in July 2012 whereby the limit was increased to £300,000 or $485,040 approximately until September 30, 2012 whereby it again reverts to £200,000 or $323,360 untill December 2012. The annual interest rate is 4.25% over the bank’s sterling base rate, which was 0.5% as of December 31 and June 30, 2012, respectively. Total outstanding balance as of December 31, 2012 was £nil or $nil.

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 $1,616,800 for a period of 5 years with monthly payments of £18,420, or $29,781 approximately. The interest rate was 4% which is 3.5% above bank sterling base rate. As of June 30, 3012, the subsidiary had 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. As of December 31, 2012, The subsidiary has used this facility up to £784,106, or $1,267,743, of which £563,063, or $910,361, was shown as long term and remaining £221,043, or $357,382, as current maturity. Interest expense, for the period ended December 31, 2012 and December 31, 2011, was £29,353, or $46,756 and £8,250 or $12,787, respectively.

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 $1,666,667 approximately (secured by the first charge of Rs. 580 million or approximately $5.95 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 $1,058,201 of which $793,651 was shown as long term liabilities and the remainder of $264,550 as current maturity. As of the period ended December 31, 2012, the company had used a total of Rs. 87,500,000 or approximately $897,436 of which $384,615 is shown as long term liabilities and the remainder of $512,821 as current maturity. Interest expense, for the six month period ended December 31, 2012 and December 31, 2011, was $70,696 and $70,710, respectively.

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 six months ended December 31, 2012 and 2011.

Following is the aggregate minimum future lease payments under capital leases as of December 31 and June 30, 2012:

	As of December 31 2012			As of June 30 2012
Minimum Lease Payments
Due FYE 12/31/12	$	-		$	629,251
Due FYE 12/31/13		350,850			215,953
Due FYE 12/31/14		215,751			71,218
Due FYE 12/31/15		87,320			-
Total Minimum Lease Payments		653,921			916,422
Interest Expense relating to future periods		(82,545	)		(83,621	)
Present Value of minimum lease payments		571,376			832,801
Less: Current portion		(294,555	)		(572,694	)
Non-Current portion	$	276,821		$	260,107

Following is a summary of fixed assets held under capital leases as of December 31 and June 30, 2012:

	As of December 31 2012			As of June 30 2012
Computer Equipment and Software	$	740,353		$	702,637
Furniture and Fixtures		403,408			403,439
Vehicles		677,361			468,853
Building Equipment		302,216			302,216

Total		2,123,338			1,877,145
Less: Accumulated Depreciation		(1,046,482	)		(900,790	)
Net	$	1,076,856		$	976,355

Interest expense for the six months ended December 31, 2012 and 2011 was $74,456 and $36,906, 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 December 31 and June 30, 2012:

For the period ended December 31, 2012:

TYPE OF LOAN	MATURITY DATE	INTEREST RATE			BALANCE USD

Export Refinance	Every 6 months		9.50	%	$	2,051,282

Total					$	2,051,282

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 six months ended December 31, 2012, and 2011 was $ 94,046 and $121,177, respectively.