5. STOCK PLANS

The following table presents the activity related to stock options for the three months ended September 30, 2011.

	Number of Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Options outstanding at Beginning of Period		417,544	$	11.76

Granted		-		-

Expired		-		-

Cancelled / Forfeited		-		-

Exercised		-		-		-

Options outstanding at End of Period		417,544	$	11.76	$	12,713		3.34

Exercisable (vested) at End of Period		384,190	$	12.33	$	3,606		2.89

The following table presents the activity related to stock options for the nine months ended September 30, 2011.

	Number of Shares			Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Options outstanding at Beginning of Period		507,947		$	11.07

Granted		13,750		$	4.75

Expired		(74,730	)	$	5.13

Cancelled / Forfeited		(29,423	)	$	13.30

Exercised		-			-		-

Options outstanding at End of Period		417,544		$	11.76	$	12,713		3.34

Exercisable (vested) at End of Period		384,190		$	12.33	$	3,606		2.89

The weighted average fair value of options granted during the nine-month period ended September 30, 2011 was $2.18 per share.

As of September 30, 2011, there was $56,000 of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted average period of approximately 2.68 years.

There was $21,000 of recognized compensation cost related to non-vested stock options for the nine months ended September 30, 2011.

A summary of the weighted average assumptions used in valuing stock options during the three months and nine months ended September 30, 2011 is presented below.

	Three Months Ended	Nine months Ended
	September 30, 2011*	September 30, 2011
Risk Free Interest Rate	-	1.91%

Expected Dividend Yield	-	0.00%

Expected Life in Years	-	5

Expected Price Volatility	-	50.98%

* There were no stock options or restricted stock granted during the three-month period ended September 30, 2011.

The following table presents the activity related to restricted stock for the three months ended September 30, 2011.

	Number of Shares		Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value	Weighted Average Remaining Contractual Term (in years)
Restricted stock outstanding at Beginning of Period		45,570	$	7.23

Granted		-		-

Cancelled / Forfeited		-		-

Exercised/Released/Vested		-		-

Restricted stock outstanding at End of Period		45,570	$	7.23	$218,736	8.01

The following table presents the activity related to restricted stock for the nine months ended September 30, 2011.

	Number of Shares			Weighted Average Grant-Date Fair Value		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term (in years)
Restricted stock outstanding at Beginning of Period		39,528		$	10.26

Granted		13,158		$	4.75

Cancelled / Forfeited		-			-

Released/Vested		(7,116	)	$	19.47	$	31,666

Restricted stock outstanding at End of Period		45,570		$	7.23	$	218,736	8.01

The weighted average fair value of restricted stock granted during the nine-month period ended September 30, 2011 was $4.75 per share.

As of September 30, 2011, there was $115,000 of total unrecognized compensation cost related to non-vested restricted stock. This cost is expected to be recognized over a weighted average period of approximately 2.50 years.

There was $79,000 of recognized compensation cost related to non-vested stock options for the nine months ended September 30, 2011.

The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, the Company is authorized to issue to eligible employees shares of common stock. There are 292,136 shares authorized under the ESPP. The ESPP will terminate February 27, 2017. The ESPP is implemented by participation periods of not more than twenty-seven months each. The Board of Directors determines the commencement date and duration of each participation period. The Board of Directors approved the current participation period of November 24, 2010 to November 23, 2011. An eligible employee is one who has been continually employed for at least 90 days prior to commencement of a participation period. Under the terms of the ESPP, employees can choose to have up to 10 percent of their compensation withheld to purchase the Company's common stock each participation period. The purchase price of the stock is 85 percent of the lower of the fair market value on the last trading day before the date of participation or the fair market value on the last trading day during the participation period.

As of September 30, 2011, there was $11,300 of unrecognized compensation cost related to ESPP issuances. This cost is expected to be recognized over a weighted average period of approximately 0.25 years.

There was $33,900 of recognized compensation cost related to ESPP issuances for the nine-month period ended September 30, 2011.

The weighted average fair value at issuances date during the nine-month period ended September 30, 2011 was $1.22.

A summary of the weighted average assumptions used in valuing ESPP issuances during the three months and nine months ended September 30, 2011 is presented below.

	Three Months Ended	Nine Months Ended
	September 30, 2011	September 30, 2011
Risk Free Interest Rate	0.26%	0.26%

Expected Dividend Yield	0.00%	0.00%

Expected Life in Years	1.00	1.00

Expected Price Volatility	30.00%	30.00%