E. Stock-Based Compensation

The Company measures the cost of employee services in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the cost over the requisite service period, typically the vesting period.

On August 4, 2011, the Company's stockholders approved the 2011 Incentive Plan. 500,000 shares of common stock are authorized for issuance under the 2011 Incentive Plan. After the 2011 Incentive Plan was approved by the Company's stockholders on August 4, 2011, the 2001 Equity Incentive Plan was terminated pursuant to a Board resolution.

On August 9, 2012, the Board granted options to purchase a total of 40,000 shares of the Company's common stock to members of senior management. These stock options have an exercise price of $10.00, have a five-year life expiring on August 9, 2017, and vest as follows: 30% on the first anniversary of the grant date; an additional 30% on the second anniversary of the grant date; and the remaining 40% on the third anniversary of the grant date. The weighted average grant date fair value was $2.44 and the total stock compensation related expense for this grant for the year ended December 31, 2012, was approximately $12,000. The unrecognized compensation expense related to these options of approximately $86,000 as of December 31, 2012, will be recognized over a weighted average period of 2.7 years.

On March 14, 2011, the Company granted options to purchase a total of 90,000 shares of the Company's common stock to members of senior management and directors. These stock options have an exercise price of $22.50, have a five-year life expiring on March 14, 2016, and vest as follows: 30% on the first anniversary of the grant date; an additional 30% on the second anniversary of the grant date; and the remaining 40% on the third anniversary of the grant date. The weighted average grant date fair value was $9.82 and the total stock compensation related expense for this grant for the years ended December 31, 2012 and 2011, was approximately $265,000 and $211,000, respectively. The unrecognized compensation expense related to these options as of December 31, 2012, was $409,000 and will be recognized over a weighted average period of 1.2 years.

The following table summarizes the inputs to the option valuation model for the options granted during the years ended December 31, 2012 and 2011:

	2012	2011
Expected volatility	79%	91%
Dividend rate	0%	0%
Expected term (in years)	3.45	3.45
Risk-free rate	0.38%	1.11%
Forfeiture rate	0%	0%

The Company bases expected volatility on the weighted average historical stock volatility. There is no dividend rate. The expected term utilizes historical data to estimate the period of time that the options are expected to remain unexercised. The Company bases risk-free rates on the U.S. Treasury zero-coupon rates with a remaining term equal to the expected term of the option. The Company also estimates forfeitures at the time of grant and revises, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based upon past history of actual performance, a zero forfeiture rate has been assumed.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2012 as well as activity during the year then ended:

	Number of Stock Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2010		—	$	—		—	$	—
Granted during 2011		90,000		22.50		3.2		—
Exercised during 2011		—		—		—		—
Forfeited during 2011		—		—		—		—
Expired during 2011		—		—		—		—
Outstanding at December 31, 2011		90,000		22.50		3.2		—
Granted during 2012		40,000		10.00		4.6		—
Exercised during 2012		—		—		—		—
Forfeited during 2012		—		—		—		—
Expired during 2012		—		—		—		—
Outstanding at December 31, 2012		130,000	$	18.65		3.6	$	—
Exercisable at December 31, 2012		27,000	$	22.50		3.2	$	—

Restricted stock awards are granted at a value equal to the market price of the Company's common stock on the date of the grant. On December 15, 2010, the Company granted a total of 12,647 restricted shares of common stock to 12 employees of the Company. These shares vest as follows: 30% on the first anniversary of the grant date; an additional 30% on the second anniversary of the grant date; and the remaining 40% on the third anniversary of the grant date. On December 30, 2011, the Company granted a total of 10,928 restricted shares of common stock to its directors as a portion of their base director compensation for 2012. These shares vested immediately on the grant date. On February 29, 2012, the Company granted a total of 7,132 restricted shares to 14 employees of the Company. These shares vest as follows: 30% on the first anniversary of the grant date; an additional 30% on the second anniversary of the grant date; and the remaining 40% on the third anniversary of the grant date. On December 17, 2012, the Company granted a total of 13,650 restricted shares of common stock to its directors as a portion of their base director compensation for 2013. These shares vested immediately on the grant date. Total stock compensation related expense for these grants for the years ended December 31, 2012 and 2011, was approximately $151,000 and $152,000, respectively. The unrecognized compensation expense related to these awards was approximately $132,000 as of December 31, 2012, which the Company will recognize over a weighted average period of 1.7 years. The total fair value of shares vested during the year ended December 31, 2012, was approximately $88,000.

The following table summarizes information about restricted stock grants outstanding at December 31, 2012 as well as activity during the year then ended:

	Number of Stock Grants			Weighted Average Grant Date Fair Value per Share
Outstanding non vested at December 31, 2010		12,647		$	18.90
Granted during 2011		10,928			7.33
Vested during 2011		(14,714	)		10.31
Forfeited during 2011		—			—
Outstanding non vested at December 31, 2011		8,861			18.90
Granted during 2012		20,782			6.27
Vested during 2012		(17,182	)		7.96
Forfeited during 2012		(918	)		15.36
Outstanding non vested at December 31, 2012		11,543		$	12.72

The 2011 Incentive Plan had 428,290 shares remaining available for future issuance at December 31, 2012.