6.	Stock-Based Compensation.

In August 2008, our stockholders approved the 2008 Equity Incentive Plan (the “2008 Plan”), which provides for the grant of equity incentives, consisting of options, stock appreciation rights, restricted stock and restricted stock units to officers, other key employees, directors and consultants. The 2008 Plan initially set aside, for the grant of equity incentives, 300,000 shares of the Company’s common stock, plus an additional 41,500 shares which was equal to the total number of shares that were then available for the grant of new options under our existing stockholder approved stock incentive plans (the “Previously Approved Plans”). At the same time, those 41,500 shares ceased to be issuable under the Previously Approved Plans. At June 30, 2012, options to purchase a total of 436,001 shares of our common stock and a total of 319,001 of unvested restricted shares were outstanding under the 2008 Plan and the Previously Approved Plans and 17,666 shares and zero shares remained available for future grants of equity incentives under the 2008 Plan and the Previously Approved Plans, respectively.

The Previously Approved Plans had provided that, if any options outstanding under any of those Plans were to expire or otherwise terminate, rather than being exercised, the shares that had been subject to those options would become available for the grant of new options or other equity incentives under those Plans. However, the 2008 Plan provides, instead, that if any of those options expire or terminate for any reason, then, the number of shares that will become available for grants or awards of equity incentives under the 2008 Plan will be increased by an equivalent number of shares, instead of becoming available for new equity incentive grants under the Previously Approved Plans. Therefore, if any equity incentives outstanding under the Previously Approved Plans as of June 30, 2012 expire, terminate or are reacquired by the Company, then a number of shares, equal to the number of shares that had been subject to those equity incentives, would become available for future grants under the 2008 Plan and those shares would cease to be available for future grants under the Previously Approved Plans.

The fair value of each outstanding option is estimated as of the date of grant using a binomial model. This model incorporates certain assumptions including a risk-free market interest rate, expected dividend yield of the underlying common stock, expected option life and expected volatility in the market value of the underlying common stock.

Expected volatilities are based on the historical volatility of the Company’s common stock. The risk free interest rate is based upon market yields for United States Treasury debt securities. The expected dividend yield is based upon the Company’s dividend policy and the fair market value of the Company’s shares at the time of grant. Expected lives are based on several factors, including the average holding period of outstanding options, their remaining terms and the cycle of our long range business plan.

We did not grant any stock options in the six months ended June 30, 2012 or 2011. As a result, no estimates of the fair market values of options were made during either of those periods.

The following tables summarize stock option activity during the six month periods ended June 30, 2012 and 2011:


	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Average Intrisic Value
Outstanding at January 1, 2012		546,001		$	4.54
Granted		—			—
Exercised		—			—
Forfeited		(110,000	)		8.30

Outstanding and exercisable at June 30, 2012		436,001		$	3.59		2.3 years	$	174,267

The average intrinsic value set forth in the above table represents the total pre-tax intrinsic value (the average of the differences between the closing stock price of the Company’s common stock on June 30, 2012 and the exercise prices of the then outstanding in-the-money options) that would have been received by the option holders if all of the in-the-money options had been exercised on June 30, 2012. No options were exercised in the six months ended June 30, 2012.

A summary of the status of the Company’s unvested options as of June 30, 2012 and changes during the six month period ended June 30, 2012 is presented below:


	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2012		69,200		$	0.73
Granted		—			—
Vested		(69,200	)		0.73
Forfeited		—			—

Nonvested at June 30, 2012		—		$	—

We recognized stock-based compensation expense of $120,000 and $102,000 for the quarters ended June 30, 2012 and 2011, respectively, and $219,000 and $225,000 for the six months ended June 30, 2012 and 2011, respectively, as a component of selling, general and administrative expenses in our condensed consolidated statements of operations.

There were no nonvested options at June 30, 2012, and therefore, no unrecognized compensation cost related to nonvested options at that time.

Restricted Shares of Common Stock. During the first three months of 2010, we began granting awards of restricted shares of common stock under the 2008 Plan to some of our officers and other key management employees. Restricted shares generally vest in equal annual increments over a three or four year service period. Compensation expense for such awards, which is based on the fair market value of the awards on their respective dates of grant, is recorded over those service periods.

A summary of the status of the Company’s restricted share activity follows:


	Shares			Weighted Average Grant Date Fair Value
Outstanding at January 1, 2012		232,501		$	4.31
Granted		147,500			2.28
Vested		(58,500	)		(4.15	)
Forfeited		(2,500	)		(4.34	)

Nonvested at June 30, 2012		319,001		$	3.40

Unrecognized compensation cost related to the nonvested service-conditioned restricted shares outstanding under our 2008 Plan totaled approximately $821,210 and $887,158 at June 30, 2012 and 2011, respectively. The cost is expected to be recognized generally over a weighted average period of 2.1 and 2.4 years measured, respectively, from June 30, 2012 and June 30, 2011. No restricted shares were granted under any of our Previously Approved Plans.