Note 11 — Equity Incentive Plan

In May 2013, the Company adopted the 2013 Equity Incentive Plan (as amended and restated, the “Plan”) and reserved shares of common stock for issuance under the Plan, which was last amended in June 2021. As a result of the last amendment, the number of shares authorized for issuance under the Plan increased by 500,000 shares and the Plan will now terminate in June 2031, unless sooner terminated or extended by the Company’s Board of Directors (the “Board”).The Plan is administered by the Compensation Committee of the Board.At December 31, 2022, there were 176,430 shares of common stock available for issuance under the Plan.

During the year ended December 31, 2022, the Company granted 31,062 stock options to Board members, 57,500 restricted stock units and 97,500 performance stock units to executives and 30,000 stock options, 59,500 restricted stock units and 16,500 performance stock units to employees under the Plan. The estimated fair value of these equity grants, calculated using the Black-Scholes option valuation model for the stock options and a Monte Carlo simulation model for the performance stock units, which contain market conditions, was $2,688,111, of which $320,722 was recognized in the respective department expenses in the statement of operations for the year ended December 31, 2022.

During the year ended December 31, 2021, the Company granted 31,821 stock options to Board members, 100,000 restricted units to executives and 100,000 stock options to employees under the Plan. The estimated fair value of these equity grants, calculated using the Black-Scholes option valuation model for the stock options, was $2,078,872, of which $327,414 was recognized during the year ended December 31, 2021.

As permitted by SAB 107, management utilizes the simplified approach to estimate the expected term of stock options, which represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. treasury yield in effect at the time of grant. The volatility is estimated based on the historical volatilities of comparable companies. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

The assumptions used in the Black-Scholes model are as follows:

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The Company utilizes the same expected volatility in the Monte Carlo simulation for performance stock units.

A summary of the Company’s stock option activity and related information is as follows:

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The following table sets forth additional information about stock options outstanding at December 31, 2022:

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Stock options granted under the Plan have ten-year terms and generally vest immediately or annually over a three-year vesting period except for option grants to independent directors that generally vest quarterly over a one-year vesting period.

The estimated aggregate pretax intrinsic value (the difference between the Company’s stock price on the last day of the year ended December 31, 2022 and the exercise prices, multiplied by the number of in-the-money options) is $2.1 million for both outstanding and vested options. This amount changes based on the fair value of the Company’s stock.

A summary of the Company’s restricted stock unit (RSU) and performance stock unit (PSU) activity is as follows:

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In the year ended December 31, 2022, 33,334 restricted stock units vested of which 12,451 restricted stock units were forfeited to cover the executives’ payroll tax withholding obligations. The payment of the taxes on the vesting of the restricted stock units is shown as a financing activity on the statement of cash flow.

As of December 31, 2022, there was $3,273,829 of unrecognized compensation cost related to non-vested share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 1.0 years.