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

9 Months Ended

Mar. 31, 2012

Debt and Capital Leases Disclosures [Text Block]

NOTE 12 - DEBTS

(A) LOANS AND LEASES PAYABLE

Notes payable consisted of the following:

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

D&O Insurance	$	134,154	$	134,154	$	-
Bank Overdraft Facility		251,499		251,499		-
HSBC Loan		1,479,075		353,448		1,125,627
Term Finance Facility		1,099,384		274,846		824,538
Subsidiary Capital Leases		1,138,062		941,925		196,137
	$	4,102,174	$	1,955,872	$	2,146,302


	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 March 31, 2012 and June 30, 2011, respectively. Interest paid during the period ended March 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 1.85%% and 2% as of March 31, 2012 and June 30, 2011, respectively. Interest expense during the nine months ended March 31, 2012 and 2011 was $41,089 and $97,660, respectively. During the period ended March 31, 2012, the Company redeemed all certificates of deposits worth $5.7 million by completely paying off the 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.

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 March 31, 2012 and June 30, 2011, respectively. Total outstanding balance as of March 31, 2012 was £157,285 or $251,499 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 $1,599,000 for a period of 5 years with monthly payments of £18,420, or $29,454 approximately. The interest rate was 4% which is 3.5% above bank sterling base rate. The subsidiary has used this facility up to £925,000, or $1,479,075, of which £703,957, or $1,125,627, was shown as long term and remaining £221,043, or $353,448, as current maturity. Interest expense, for the period ended March 31, 2012, was £17,101, or $27,110.

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. 175,000,000 or approximately $1,923,923 (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 $869,767, of which $434,883 was shown as long term liabilities, and the remainder of $434,884 as current maturity. As of the nine months ended March 31, 2012, the Company paid back the installment of Rs. 25,000,000 reducing the outstanding principal amount to Rs. 50,000,000 or approximately $549,692. The company also availed another Rs. 50,000,000 increasing the outstanding balance to Rs. 100,000,000 or approximately $1,099,384, of which $824,838 is shown as long term liabilities and the remainder of $274,846 as current maturity.

The Company leases various fixed assets under capital lease arrangements expiring in various years through 2017. 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, 2012 and 2011.

Following is the aggregate minimum future lease payments under capital leases as of March 31, 2012 and June 30, 2011:

	As of March 31			As of June 30
	2012			2011
Minimum Lease Payments
Due FYE 3/31/13	$	-		$	1,010,836
Due FYE 3/31/14		988,817			209,260
Due FYE 3/31/15		189,309			115,346
Due FYE 3/31/16		26,061			-
Due FYE 3/31/17		-			-
Total Minimum Lease Payments		1,204,187			1,335,442
Interest Expense relating to future periods		(66,125	)		(102,856	)
Present Value of minimum lease payments		1,138,062			1,232,585
Less: Current portion		(941,925	)		(947,113	)
Non-Current portion	$	196,137		$	285,472

Following is a summary of fixed assets held under capital leases as of March 31, 2012 and June 30, 2011:

	As of March 31			As of June 30
	2012			2011
Computer Equipment and Software	$	620,528		$	518,911
Furniture and Fixtures		765,405			769,106
Vehicles		438,442			434,049
Building Equipment		302,216			302,216

Total		2,126,590			2,024,282
Less: Accumulated Depreciation		(1,088,621	)		(807,562	)
Net	$	1,037,969		$	1,216,720

Interest expense for the nine months ended March 31, 2012 and 2011 was $54,144 and $27,967, 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, 2012 and June 30, 2011:

For the period ended March 31, 2012:
TYPE OF	MATURITY	INTEREST			BALANCE
LOAN	DATE	RATE			USD

Export Refinance	Every 6 months		11.00	%	$	2,198,769

Total					$	2,198,769


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 nine months ended March 31, 2012, and 2011 was $179,167 and $137,771, respectively.