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

Quarterly report pursuant to Section 13 or 15(d)

Note 15 - Incentive And Non-Statutory Stock Option Plan

Note 15 - Incentive And Non-Statutory Stock Option Plan

3 Months Ended

Sep. 30, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 15 - INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

Common stock purchase options and warrants consisted of the following:

OPTIONS:
	# of shares			Weighted Average Exericse Price		Weighted Average Remaining Contractual Life (in years)		Aggregated Intrinsic Value

Outstanding and exercisable, June 30, 2013		311,462		$	15.65		3.3
Granted		52,500		$	7.82
Exercised		(52,500	)	$	7.82
Expired / Cancelled		(9,000	)	$	32.70
Outstanding and exercisable, September 30, 2013		302,462		$	15.14		3.11	$	517,621

WARRANTS:
Outstanding and exercisable, June 30, 2013		163,124		$	7.29		3.44
Granted / adjusted		-			-
Exercised		-			-
Expired		-			-
Outstanding and exercisable, September 30, 2013		163,124		$	7.29		2.94	$	446,625

The average life remaining on the options and warrants as of September 30, 2013 is as follows:

Exercise Price				Number Outstanding and Exercisable		Weighted Average Remaining Contractual Life		Weighted Average Exericse Price
OPTIONS:

	$0.10	-	$9.90		183,462		3.71		7.21
	$10.00	-	$19.90		14,000		2.35		18.18
	$20.00	-	$29.90		91,000		2.45		25.31
	$30.00	-	$50.00		14,000		0.40		50.00
Totals					302,462		3.11		15.14

WARRANTS:

	$3.10	-	$7.73		163,124		2.94		7.29
Totals					163,124		2.94		7.29

All options and warrants granted are vested and are exercisable as of September 30, 2013.

Below is the table summarizing stock grants awarded as compensation:

Issued by the Company	# of shares			Weighted Average Grant Date Fair Value ($)

Unvested, June 30, 2012		-			-
Granted		3,750		$	5.48
Vested		(3,750	)	$	5.48
Unvested, June 30, 2013		-			-
Granted		86,899		$	10.68
Vested		(21,724	)	$	10.68
Unvested, September 30, 2013		65,175		$	10.68

(A) INCENTIVE AND NON-STATUTORY STOCK OPTION PLANS

The Company maintains several Incentive and Non-Statutory Stock Option Plans (“Plans”) for its employees and consultants. Options granted under these Plans to an employee of the Company become exercisable over a period of no longer than ten (10) years and no less than twenty percent (20%) of the shares are exercisable annually. Options are not exercisable, in whole or in part, prior to one (1) year from the date of grant unless the Board specifically determines otherwise, as provided.

Two types of options may be granted under these Plans: (1) Incentive Stock Options (also known as Qualified Stock Options) which may only be issued to employees of the Company and whereby the exercise price of the option is not less than the fair market value of the common stock on the date it was reserved for issuance under the Plan; and (2) Non-statutory Stock Options which may be issued to either employees or consultants of the Company and whereby the exercise price of the option is less than the fair market value of the common stock on the date it was reserved for issuance under the plan. Grants of options may be made to employees and consultants without regard to any performance measures. All options issued pursuant to the Plan are nontransferable and subject to forfeiture.

OPTIONS

During the quarter ended September 30, 2013, the Company granted 47,500 options to four employees with an exercise price of $8 per share and an expiration date of 3 months, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $106,486 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

·	Risk-free interest rate - 0.05%

·	Expected life - 3 months

·	Expected volatility - 45.99%

·	Expected dividend - 0%

During the quarter ended September 30, 2013, the Company granted 5,000 options to one employee with an exercise price of $6.10 per share and an expiration date of 1 month, vesting immediately. Using the Black-Scholes method to value the options, the Company recorded $18,551 in compensation expense for these options in the accompanying consolidated financial statements. The Black-Scholes option pricing model used the following assumptions:

·	Risk-free interest rate - 0.02%

·	Expected life - 1 month

·	Expected volatility - 23.13%

·	Expected dividend - 0%

(B) EQUITY INCENTIVE PLAN

In May 2013, the shareholders approved the 2013 Equity Incentive Plan (the “2013 Plan”) which provides for the grant of equity-based awards, including options, stock appreciation rights, restricted stock awards or performance share awards or any other right or interest relating to shares or cash, to eligible participants. The aggregate number of shares reserved and available for award under the 2013 Plan is 1,250,000 (the Share Reserve). The 2013 Plan is administered by the Compensation Committee of the Board of Directors (“The Committee”), which shall consist of two or more “outside directors” as that term is used in Section 162 of the Code and the regulations promulgated thereunder. The 2013 Plan contemplates the issuance of common stock upon exercise of options or other awards granted to eligible persons under the 2013 Plan. Shares issued under the 2013 Plan may be both authorized and unissued shares or previously issued shares acquired by the Company. Upon termination or expiration of an unexercised option, stock appreciation right or other stock-based award under the 2013 Plan, in whole or in part, the number of shares of common stock subject to such award again becomes available for grant under the 2013 Plan. Any shares of restricted stock forfeited as described below will become available for grant. The aggregate Fair Market Value (determined at the time of the award) of all shares of Stock with respect to which Incentive Stock Options are first exercisable by a Participant in any calendar year may not exceed $100,000. All options issued pursuant to the Plan are nontransferable and subject to forfeiture.

Stock Options

Options granted under the 2013 Plan are not generally transferable and the term shall be set by The Committee but must be exercised within 10 years, subject to earlier termination upon termination of the option holder's employment, but in no event later than the expiration of the option's term. The exercise price of each option may not be less than the fair market value of a share of the Company’s common stock on the date of grant (except in connection with the assumption or substitution for another option in a manner qualifying under Section 424(a) of the Internal Revenue Code of 1986, as amended (the Code). Incentive stock options granted to any participant who owns 10% or more of the Company’s outstanding common stock (a Ten Percent Shareholder) must have an exercise price equal to or exceeding 110% of the fair market value of a share of our common stock on the date of the grant and must not be exercisable for longer than five years. Options become vested and exercisable at such times or upon such events and subject to such terms, conditions, performance criteria or restrictions as specified by the Committee.

Performance Awards

Under the 2013 Plan, a participant may also be awarded a "performance award," which means that the participant may receive cash, stock or other awards contingent upon achieving performance goals established by the Committee. The Committee may also make "deferred share" awards, which entitle the participant to receive the Company’s stock in the future for services performed between the date of the award and the date the participant may receive the stock. The vesting of deferred share awards may be based on performance criteria and/or continued service with the Company. A participant who is granted a "stock appreciation right" under the Plan has the right to receive all or a percentage of the fair market value of a share of stock on the date of exercise of the stock appreciation right minus the grant price of the stock appreciation right determined by the Committee (but in no event less than the fair market value of the stock on the date of grant). Finally, the Committee may make "restricted stock" awards under the 2013 Plan, which is subject to such terms and conditions as the Committee determines and as are set forth in the award agreement related to the restricted stock. As of September 30, 2013, Nil shares have been issued under this plan to non-officers employees.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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