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

9 Months Ended

Mar. 31, 2013

Debt and Capital Leases Disclosures [Text Block]

NOTE 13 - DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

Name	As of March 31 2013		Current Maturities		Long-Term Maturities

D&O Insurance	$	131,650	$	131,650	$	-
Habib Bank Line of Credit		1,976,575		1,976,575		-
Bank Overdraft Facility		270,439		270,439		-
HSBC Loan		1,119,789		336,184		783,605
Term Finance Facility		753,163		376,582		376,581
Subsidiary Capital Leases		534,835		294,567		240,268
	$	4,786,451	$	3,385,997	$	1,400,454

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		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 0.40% and 0.42% as of March 31, 2013 and June 30, 2012, respectively. Interest paid during the period ended March 31, 2013 and 2012 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 March 31, 2013 and June 30, 2012, respectively.

Interest expense during the nine months ended March 31, 2013 and 2012 was $20,032 and $41,089, 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 March 31, 2013 and June 30, 2012 respectively. Interest expense during the nine months ended March 31, 2013 was $2,844.

The amount mentioned above, represents combined 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 $304,180. The annual interest rate is 4.25% over the bank’s sterling base rate, which was 0.5% as of March 31, 2013 and June 30, 2012, respectively. Total outstanding balance as of March 31, 2013 was £177,815 or $270,439.

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 $1,520,900 for a period of 5 years with monthly payments of £18,420, or $28,015 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 March 31, 2013, the subsidiary has used this facility up to £736,267, or $1,119,789, of which £515,225, or $783,605, was shown as long term and remaining £221,043, or $336,184, as current maturity. Interest expense, for the period ended March 31, 2013 and March 31, 2012, was £41,109, or $64,952 and £17,101 or $27,110, 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 $1,631,854 (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 March 31, 2013, the company had used a total of Rs. 75,000,000, or, approximately $753,163 of which $376,581 is shown as long term liabilities and the remainder of $376,582 as current maturity. Interest expense, for the nine month period ended March 31, 2013 and March 31, 2012, was $91,610 and $111,089, 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 nine months ended March 31, 2013 and 2012.

Following is the aggregate minimum future lease payments under capital leases as of March 31, 2013 and June 30, 2012:

	As of March 31 2013			As of June 30 2012
Minimum Lease Payments
Due FYE 3/31/13	$	-		$	629,251
Due FYE 3/31/14		341,561			215,953
Due FYE 3/31/15		197,257			71,218
Due FYE 3/31/16		63,381			-
Total Minimum Lease Payments		602,199			916,422
Interest Expense relating to future periods		(67,364	)		(83,621	)
Present Value of minimum lease payments		534,835			832,801
Less: Current portion		(294,567	)		(572,694	)
Non-Current portion	$	240,268		$	260,107

Following is a summary of fixed assets held under capital leases as of March 31, 2013 and June 30, 2012:

	As of March 31 2013			As of June 30 2012
Computer Equipment and Software	$	460,020		$	702,637
Furniture and Fixtures		964			403,439
Vehicles		563,363			468,853
Building Equipment		-			302,216
Total		1,024,347			1,877,145
Less: Accumulated Depreciation		(309,769	)		(900,790	)
Net	$	714,578		$	976,355

Interest expense for the nine months ended March 31, 2013 and 2012 was $92,851 and $54,144, 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 March 31, 2013 and June 30, 2012:

For the period ended March 31, 2013:

TYPE OF LOAN	MATURITY DATE	INTEREST RATE	BALANCE USD

Export Refinance	Every 6 months	9.50%	$ 2,008,435

Total			$ 2,008,435

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 nine months ended March 31, 2013, and 2012 was $137,749 and $179,167, respectively.