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Note 14 - Convertible Notes Payable
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Sep. 30, 2012
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| Debt Disclosure [Text Block] |
NOTE
14 – CONVERTIBLE NOTES PAYABLE
The
net outstanding balance of convertible notes as of
September 30 and June 30, 2012 is as follows:
For
the periods ended September 30, 2012 and 2011, the interest
accrued on convertible notes was $225,011 and $116,262,
respectively.
(A)
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 $8.95 per share. The
warrants entitle the investors to acquire a total of
140,845 shares of common stock, have a 5 year term, and
have an initial exercise price of $8.95 per share. The
Notes and Warrant terms contain standard anti-dilution
protection. The Company raised new capital
through a follow on offering under its registered shelf
offering on form S-3 in March 2012 and as a result, the
conversion price of note and exercise price of warrants
has been adjusted downward from $8.95 to $7.73.
Resultantly, the number of warrants has also been
increased to 163,021. The proceeds of the 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.
On
September 13, 2012, the parties replaced the note with a
new note for the same principal amount, an elimination of
a shareholders’ receivable condition, a decrease in
the interest rate and a decrease in the conversion price
from $7.73 to $4.93.
From
July 1, 2012 to the date of exchange, the company accrued
interest amounting to $144,000 at default rate due to
non-compliance of one of the note provisions.
The
Company has expensed out balance amount of financing cost
and discount on the old note at the date of replacement
and recorded a further discount of $381,339 which will be
amortized over the remaining life of note. However due to
partial conversion of notes worth $1,050,000 till
September 30, 2012, out of this discount, a total amount
of $113,200 has been expensed out in these consolidated
financial statements. Due to the reduction in conversion
price the number of warrants has also been adjusted to
168,943.
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