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

Quarterly report pursuant to Section 13 or 15(d)

Note 13 - Convertible Notes Payable

Note 13 - Convertible Notes Payable

3 Months Ended

Sep. 30, 2011

NOTE 13 – CONVERTIBLE NOTES PAYABLE

The net outstanding balance of convertible notes as of September 30, 2011 and June 30, 2011 is as follows:



Issue Date	Balance net of BCF @ 9/30/11		Current Portion		Long Term		Maturity Date

Sep-11		3,587,464		-		3,587,464	Sep-13
Total		3,587,464		-		3,587,464


Issue Date	Balance net of BCF @ 6/30/11		Current Portion		Long Term		Maturity Date

Jul-08		2,745,524		2,745,524		-	Jul-11
Total		2,745,524		2,745,524		-

For the periods ended September 30, 2011 and June 30, 2011, total interest accrued on convertible notes was $15,583 and $248,250, respectively.

(A) 2008 CONVERTIBLE DEBT

In July 2008, the Company issued $6,000,000 of 7% convertible debt maturing in 3 years (the “2008 Notes”), with a conversion price of $3.00 per share.

In January 2009, the 2008 Notes were amended to remove certain anti-dilution protection provisions and participation rights in future filings in exchange for a reduction in the conversion rate to $0.78, and $1,000,000 in cash, payable to the debt holders in 4 quarterly installments. Pursuant to the terms of the amendment, the Company recorded a beneficial conversion feature (“BCF”) in the amount of $230,769 which is being amortized as a component of interest expense over the maturity period. The related liability of $1,000,000 was recorded as a component of interest expense for the year-ended June 30, 2009.

In August 2009, the Company amended the 2008 Notes by reducing the conversion rate to $0.63, and recorded an additional BCF of $715,518, which is being amortized as a component of interest expense over the maturity period.

During the year-ended June 30, 2010, Holders of the 2008 Notes elected to convert principal and interest due thereon into a total of 2,513,112 shares of common stock. These conversions reduced the total principal of the 2008 Notes to $4,450,000 as of June 30, 2010.

During the year ended June 30, 2011, Holders of the 2008 Note further elected to convert the principal and interest due thereon into a total of 2,744,042 shares of common stock. These conversions reduced the principal of the 2008 Note to $2,758,330 and unamortized balance of BCF was $12,806 as of June 30, 2011.

During the three months ended September 30, 2011 the remaining balance of 2008 Note was fully paid along with interest due thereon out of the proceeds of new 2011 Convertible Note.

(B) 2011 CONVERTIBLE DEBT

On September 13, 2011, NetSol Technologies, Inc. entered into a purchase agreement to sell convertible notes with a total principal value of $4,000,000 and warrants to purchase shares of common stock to an investment fund managed by CIM Investment Management Limited and another accredited investor. The notes have a 2 year maturity date and are convertible into shares of common stock at the initial conversion price of $0.895 per share. The warrants entitle the investors to acquire a total of 1,408,451 shares of common stock, have a 5 year term and have an initial exercise price of $0.895 per share. The proceeds of Convertible note were assigned between warrants and convertible note per ASC 470-20. The company recorded $401,648 capitalized financing cost and discount of $19,665 on shares to be issued upon conversion of note into equity. This capitalized finance cost and discount will be amortized over the life of the note.