Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION

v3.20.2
STOCK-BASED COMPENSATION
6 Months Ended
Jun. 30, 2020
Share-based Payment Arrangement [Abstract]  
STOCK-BASED COMPENSATION

NOTE 4  STOCK-BASED COMPENSATION

 

On June 29, 2016, the Board of Directors amended the Company’s 2015 Stock Option Plan (as amended, the “Plan”)  authorizing the Company to grant awards to certain executives, key employees, and consultants under the Plan, which was approved by shareholders at the Annual Meeting of Shareholders  held on September 6, 2016.  The total number of shares of Common Stock, with respect to which awards may be granted pursuant to the Plan, may not exceed 6,000,000 pursuant to an amendment to the Plan approved by shareholders on April 23, 2019, at the 2019 Annual Meeting of Shareholders.

 

As of June 30, 2020, the Company had options to purchase 3,785,000 shares of Common Stock outstanding to certain executives, key employees and consultants under the Plan, of which 60,000 were issued during the six months ended June 30, 2020.

 

On May 20, 2020, the Company entered into a Settlement Agreement with EMED as described above in NOTE 3 LEGAL PROCEEDINGS.  Pursuant to the Settlement Agreement, the Company issued to EMED (i) 95,238 restricted stock units, which vested on May 21, 2020 and 95,238 restricted stock units vesting on January 1, 2021, and (ii) an option to purchase up to 400,000 shares of the Company’s common stock at an exercise price of $11.21 per share prior to February 1, 2021, which can be settled in cash in lieu of common stock at the Company’s sole discretion, provided that the number of shares of common stock and/or amount of cash paid by the Company upon exercise will be capped at a value of $16.21 per share.  The option was recorded at $347,008, the estimated fair value of the option using the Black-Scholes option pricing model with a volatility rate of 52.68% and a risk-free rate of 0.17%.

 

On February 20, 2019, the Board of Directors of the Company approved an increase in compensation for each non-employee director from $25,000 to $50,000 annually effective January 1, 2019, and an additional $10,000 annually for the chair of each Board committee effective February 20, 2019, in each case to be paid quarterly half in cash and half in common stock at the end of each fiscal quarter.  On September 30, 2019, the Board of Directors of the Company named R. John Fletcher, a current KORU Medical director, as Chairman, replacing Executive Chairman, Daniel S. Goldberger, who remains a non-executive member of KORU Medical’s Board of Directors.  In Mr. Fletcher’s role as Chairman, he receives an additional $50,000 in annual compensation, to be paid quarterly in shares of KORU Medical common stock based on the closing price of the stock on the last day of each quarter.

 

Pursuant to Daniel S. Goldberger’s employment agreement dated October 12, 2018, on February 1, 2019, when Donald B. Pettigrew was appointed to President and Chief Executive Officer, Mr. Goldberger was awarded a performance bonus in the amount of $270,000 to be paid half in cash and half in stock.  The number of shares that were issued totaled 90,604 and was based upon the closing price of the Common Stock of the Company on February 1, 2019, as reported by the OTCQX.  These shares were issued on April 3, 2019.

 

2015 STOCK OPTION PLAN, as amended

 

Time Based Stock Options

 

The per share weighted average fair value of stock options granted during the six months ended June 30, 2020 and June 30, 2019 was $6.68 and $1.16, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the six months ended June 30, 2020 and June 30, 2019. Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued.

 

    June 30,  
    2020   2019  
               
Dividend yield     0.00%     0.00%  
Expected Volatility     62.1%     58.9-60.3%  
Weighted-average volatility          
Expected dividends          
Expected term (in years)     10 Years     10 Years  
Risk-free rate     0.63%     2.12-2.72%  

 

The following table summarizes the status of the Plan with respect to time based stock options:

 

    Six Months Ended June 30,  
    2020   2019  
    Shares   Weighted
Average
Exercise
Price
  Shares   Weighted
Average
Exercise
Price
 
                   
Outstanding at January 1   3,647,000   $ 1.32     2,419,000   $ 1.00  
Granted   60,000   $ 9.76     1,300,000   $ 1.66  
Exercised   722,000   $ 0.58     65,000   $ 0.38  
Forfeited   200,000   $ 2.09       $  
Outstanding at June 30   2,785,000   $ 1.64     3,654,000   $ 1.24  
Options exercisable at June 30   812,760   $ 1.37     804,260   $ 0.63  
Weighted average fair value of options granted during the period       $ 6.68       $ 1.16  
Stock-based compensation expense     $ 290,991       $ 274,731  

 

Total stock-based compensation expense totaled $290,991 and $274,731 for the six months ended June 30, 2020 and 2019, respectively. Cash received from option exercises for the six months ended June 30, 2020 and 2019 was $95,880 and $24,700, respectively.

 

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2020 and 2019 was $0.4 million and $1.5 million, respectively.  The total intrinsic value of options exercised during the six months ended June 30, 2020 and 2019 was $253,386 and $12,796, respectively.

 

The following table presents information pertaining to options outstanding at June 30, 2020:

 

Range of Exercise Price   Number
Outstanding
  Weighted
Average
Remaining
Contractual
Life
  Weighted
Average
Exercise
Price
  Number
Exercisable
  Weighted
Average
Exercise
Price
 
                           
$0.50 – 9.76   2,785,000   7.6 years   $ 1.64   812,760   $ 1.37  

 

As of June 30, 2020, there was $2,011,224 of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 48 months. The total fair value of shares vested as of June 30, 2020 and 2019, was $1,110,068 and $313,714, respectively.

 

Performance Based Stock Options

 

The per share weighted average fair value of stock options granted during the six months ended June 30, 2020 and 2019 was zero and $1.16, respectively.  The fair value of each award is estimated on the grant date using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the six months ended June 30, 2020 and June 30, 2019.  Historical information was the primary basis for the selection of the expected volatility, expected dividend yield and the expected lives of the options.  The risk-free interest rate was selected based upon yields of the U.S. Treasury issues with a term equal to the expected life of the option being valued.

 

    June 30,  
    2020   2019  
               
Dividend yield         0.00%  
Expected Volatility         58.9%  
Weighted-average volatility          
Expected dividends          
Expected term (in years)         10 Years  
Risk-free rate         2.07%  

 

The following table summarizes the status of the Plan with respect to performance based stock options:

 

    Six Months Ended June 30,  
    2020   2019  
    Shares   Weighted
Average
Exercise
Price
  Shares   Weighted
Average
Exercise
Price
 
                   
Outstanding at January 1   1,000,000   $ 1.70       $  
Granted     $     1,000,000   $ 1.70  
Exercised     $       $  
Forfeited     $       $  
Outstanding at June 30   1,000,000   $ 1.70     1,000,000   $ 1.70  
Options exercisable at June 30     $       $  
Weighted average fair value of options granted during the period     $       $ 1.16  
Stock-based compensation expense     $ 373,826       $ 41,909  

 

Total performance stock-based compensation expense totaled $373,826 and $41,909 for the six months ended June 30, 2020 and 2019, respectively.

 

The weighted-average grant-date fair value of options granted during the six months ended June 30, 2020 and June 30, 2019, was zero and $1,162,561, respectively.

 

The following table presents information pertaining to performance based options outstanding at June 30, 2020:

 

Range of Exercise Price   Number
Outstanding
  Weighted
Average
Remaining
Contractual
Life
  Weighted
Average
Exercise
Price
  Number
Exercisable
  Weighted
Average
Exercise
Price
 
                           
$1.70   1,000,000   8.9 years   $ 1.70     $ 1.70  

 

As of June 30, 2020, there was $495,372 of total unrecognized compensation cost related to non-vested performance share option based compensation arrangements granted under the Plan. That cost is expected to be recognized over a weighted-average period of 31 months. The total fair value of shares vested as of June 30, 2020 and 2019 was zero for both periods.