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Note 15 - Convertible Notes Payable
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Dec. 31, 2012
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| Debt Disclosure [Text Block] |
NOTE
15 – CONVERTIBLE NOTES PAYABLE
The
net outstanding balance of convertible notes as of December
31 and June 30, 2012 is as follows:
For
the periods ended December 31, 2012 and 2011, the interest
accrued on convertible notes was $282,600 and $198,762,
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 $254,543 on the old note at the date of replacement
and recorded a further discount of $381,339 which will be
amortized over remaining life of note. However due to partial
conversion of notes worth $1,150,000 till December 31, 2012,
out of this discount, a total amount of $187,584 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 the 168,943.
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