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Note 14 - Convertible Notes Payable
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Mar. 31, 2012
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| Debt Disclosure [Text Block] |
NOTE
14 – CONVERTIBLE NOTES PAYABLE
The
net outstanding balance of convertible notes as of March 31,
2012 and June 30, 2011 is as follows:
For
the periods ended March 31, 2012 and June 30, 2011, the
interest accrued on convertible notes was $281,262 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. 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 nine months ended March 31, 2012, the remaining balance
of 2008 Note was fully paid along with interest due thereon
out of the proceeds of a 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 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 $0.895 to $0.773. Resultantly, the number of
warrants has also been increased to 1,630,209. 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.
This capitalized finance cost and discount will be amortized
over the life of the note.
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