Annual report pursuant to Section 13 and 15(d)

Stockholders' equity

Stockholders' equity

12 Months Ended

Dec. 31, 2021

Stockholders’ equity

Common Stock

The holders of our Common Stock have the right to vote their interest on a per share basis. At December 31, 2021 and 2020, there were 24,850,261 and 24,850,261 shares of our Common Stock outstanding, respectively.

Preferred Stock

On February 13, 2013, we authorized 10 million shares of preferred stock. As of December 31, 2021, no preferred shares were issued or outstanding.

Stock-Based Compensation

We adopted the 2006 Stock Option and Incentive Plan (the “Plan”), under which the board of directors may grant incentive or non-qualified stock options and stock grants to key employees, directors, advisors and our consultants. The Plan was amended at various dates by the Board of Directors to increase the reserved shares of common stock issuable under the Plan to 3,838,750 as of December 31, 2021, and in June 2017 stockholders approved an amendment to extend the termination date of the Plan to January 1, 2026 and to ratify all of our option grants issued after January 1, 2016 (the “Amended Plan”).

Stock options vest based upon the terms within the individual option grants, with an acceleration of the unvested portion of such options upon a change in control event, as defined in the Amended Plan. The options are not transferable except by will or domestic relations order. The option price per share under the Amended Plan cannot be less than the fair market value of the underlying shares on the date of the grant. The number of shares remaining available for future issuance under the Amended Plan as of December 31, 2021 and 2020 was 764,768 and 1,022,768, respectively.

In 2021, we granted nonqualified options to purchase an aggregate of 258,000 shares of common stock at $1.75 per share to certain officers and employees. These options have a vesting schedule of four years and expire in ten years. The fair value of the options issued in 2021 was $166,474. The weighted-average grant date fair value of stock options granted during 2021 was $0.65 per share.

During 2020, we granted nonqualified options to purchase an aggregate of 1,440,000 shares of common stock for between $0.71 and $0.78 per share to certain employees and a director. These options have a vesting schedule of four years and expire in ten years. Several of the options granted in 2020 include performance-based option vesting provisions, which vesting is subject to our estimate of future financial performance and could require changes to the vesting in future periods. The fair value of the options issued in 2020 was $404,460. The weighted-average grant date fair value of stock options granted during 2020 was $0.28 per share.

In 2021 and 2020, option holders exercised 0 and 1,000 options, respectively, with an aggregate intrinsic value of $0 and $20, respectively.

Stock option activity for the year ended December 31, 2021 was as follows:


Common Stock Options	Number of Options	Exercise Price Per Share				Weighted Average Exercise Price		Weighted Average Remaining Life	Aggregate Intrinsic Value
Outstanding, December 31, 2020	2,496,242	$	0.71	—	$10.33	$	1.94	7.37 years	$	731,744
Granted	258,000	$1.75				1.75

Exercised	—	—
Canceled and forfeited	(367,400)	$	0.08	—	$4.50	2.70


Outstanding, December 31, 2021	2,386,842	$	0.71	—	$10.33	$	1.81	7.56 years	$	697,935
Exercisable, December 31, 2021	719,633					$	3.53		$	71,785
Vested and expected to vest, December 31, 2021	2,136,731					$	1.89		$	604,012

We used a forfeiture rate of 15% to calculate the expected to vest shares in the table above. We use the Black-Scholes option pricing model to determine the fair value of stock options granted. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the average volatility of four comparable publicly traded companies. The average expected life was estimated using the simplified method to determine the expected life based on the vesting period and contractual terms, since we do not have the necessary historical exercise data to determine an expected life for stock options. We use a single weighted-average expected life to value option awards and recognize compensation on a straight-line basis over the requisite service period for each separately vesting portion of the awards. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with a remaining term which approximates the expected life assumed at the date of grant.

The weighted average assumptions used in the Black-Scholes option pricing model for options granted in 2021 and 2020 are as follows:


Stock option awards:	2021	2020
Expected life	6.25 years	6.25 years
Risk-free interest rate	1.09%	0.41%
Expected volatility	35.86%	40.10%

During the years ended December 31, 2021 and 2020, we recognized stock-based compensation expense of $202,431 and $163,464, respectively, related to the issuance of stock options. No tax benefit was recognized related to the stock-based compensation expense recorded during either of the years. At December 31, 2021 and 2020, the total compensation cost related to unvested stock option awards not yet recognized is $470,063 and $340,503, respectively. This amount will be recognized over a weighted average period of 1.99 years.