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

6 Months Ended

Dec. 31, 2011

Debt and Capital Leases Disclosures [Text Block]

NOTE 12 - DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

	As of December 31		Current		Long-Term
Name	2011		Maturities		Maturities

Habib Bank Line of Credit	$	2,703,618		2,703,618		-
HSBC Loan		1,308,210		341,644		966,566
Term Finance Facility		1,247,228		415,743		831,485
Subsidiary Capital Leases		1,197,913		952,774		245,139
Lease abandonment liability		-		-		-
	$	6,456,969	$	4,413,779	$	2,043,190


	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 December 31, 2011 and June 30, 2011. Interest paid during the period ended December 31, 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 was1.85% and 2% as of December 31, 2011 and June 30, 2011, respectively. Interest expense during the six months ended December 31, 2011 and 2010 was $32,131 and $64,718, 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 $2,703,618.

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 $310,000. The annual interest rate is 3.25% over the bank’s sterling base rate, which was 5.00% as of December 31, 2011 and June 30, 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 $1,550,000, for a period of 5 years with monthly payments of £18,420, or $28,551 approximately. The interest rate was 4% which is 3.5% above bank sterling base rate. The subsidiary has used this facility up to £846,409, or $1,308,210, of which £625,366, or $966,566, was shown as long term and remaining £221,043, or $341,644, as current maturity. Interest expense, for the period ended December 31, 2011,was £8,250, or $12,787.

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 $2,217,295 (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 six months ended December 31, 2011, the Company paid back the installment of Rs. 12,500,000 reducing the outstanding principal amount to Rs. 62,500,000 or approximately $709,260. The company also availed another Rs. 50,000,000 increasing the outstanding balance to Rs. 112,500,000 or approximately $1,247,228, of which $831,485 is shown as long term liabilities and the remainder of $415,743 as current maturity.

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 six months ended December 31, 2011 and 2010.

Following is the aggregate minimum future lease payments under capital leases as of December 31, 2011 and June 30, 2011:

	As of December 31			As of June 30
	2011			2011
Minimum Lease Payments
Due FYE 12/31/12	$	-		$	1,010,836
Due FYE 12/31/13		1,007,127			209,260
Due FYE 12/31/14		209,994			115,346
Due FYE 12/31/15		61,121			-
Due FYE 12/31/16		-			-
Total Minimum Lease Payments		1,278,242			1,335,442
Interest Expense relating to future periods		(80,329	)		(102,856	)
Present Value of minimum lease payments		1,197,912			1,232,585
Less: Current portion		(952,774	)		(947,113	)
Non-Current portion	$	245,138		$	285,472

Following is a summary of fixed assets held under capital leases as of December 31, 2011 and June 30, 2011:

	As of December 31			As of June 30
	2011			2011
Computer Equipment and Software	$	623,476		$	518,911
Furniture and Fixtures		765,974			769,106
Vehicles		442,136			434,049
Building Equipment		302,216			302,216

Total		2,133,802			2,024,282
Less: Accumulated Depreciation		(1,008,161	)		(807,562	)
Net	$	1,125,641		$	1,216,720

Interest expense for the six months ended December 31, 2011 and 2010 was $36,906 and $16,332, 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, 2011 and June 30, 2011:

For the period ended December 31, 2011:
TYPE OF	MATURITY	INTEREST		BALANCE
LOAN	DATE	RATE		USD

Export Refinance	Every 6 months		11.00%	$	2,217,295

Total				$	2,217,295


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 six months ended December 31, 2011 and 2010 was $121,177 and $105,797, respectively.