We account for stock-based compensation in accordance with ASC 718 Compensation—Stock Compensation. ASC 718 requires all share-based payments to employees, including grants of employee stock options and restricted stock units ("RSUs"), to be recognized in the consolidated statement of operations based on their fair values and that compensation expense be recognized for awards over the requisite service period of the award or to an employee's eligible retirement date, if earlier. This accounting standard also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow.

On January 10, 2011, the Company granted, pursuant to the execution of an employment agreement with our President and Chief Executive Officer, nonqualified stock options to purchase a total of 150,000 shares of the Company's common stock at a purchase price of $2.04 per share, the NASDAQ average price per share on that date. One-third of the options vested and became exercisable on the date of grant, and the remaining two-thirds of which will vest and become exercisable in equal installments on the first and second anniversaries of the effective date of the employment agreement, subject to continued employment with the Company as of each applicable vesting dates. The weighted average grant date fair value of the 150,000 options was $1.32 per share and was determined using a Black-Scholes option pricing model.

On January 21, 2011, in connection with the termination without cause of our former chief operating officer, 125,000 RSUs and a cash award of $93,500 vested and became non-forfeitable upon termination, pursuant to a Restricted Stock and Cash Award Agreement.

On January 28, 2011, the Compensation Committee of the Board of Directors of the Company approved the grant of (i) nonqualified stock options to purchase a total of 340,500 shares of the Company's common stock at a purchase price of $2.32 per share, the NASDAQ average price per share on that date; (ii) a total of 113,600 RSUs with a fair value of $2.32 per unit, the NASDAQ Official average price per share on that date; and (iii) cash-based performance awards totaling $604,700 to executive officers and certain key employees under the Company's 2010 Long-Term Incentive Plan. The stock options will vest and become exercisable in three equal installments in the amounts of 33% on each of the first and second anniversaries of the date of grant and 34% on the third anniversary of the date of grant. Further, all unvested options will fully vest and become exercisable immediately upon (i) the termination of employment by the death or the disability of the applicable employee or (ii) consummation of a change of control of the Company. The weighted average grant date fair value of the 340,500 options was $1.52 per share. The RSUs will vest and become non-forfeitable upon the third anniversary of the date of grant; and all unvested RSUs will vest immediately upon (i) the termination of employment by the death or the disability of the applicable employee or (ii) consummation of a change of control of the Company. The cash-based performance awards are contingent upon the achievement of differing levels of performance (as defined) and are measured by the level of the Company's Corporate Free Cash Flow (as defined) over a one-year Performance Period, which is defined as calendar year 2011. The awards earned, if any, will vest and become payable at the end of the Vesting Period, defined as the two calendar year period following the Performance Period. The earned awards also vest immediately upon (i) the termination of employment by the death or the disability of the applicable employee or (ii) consummation of a change of control of the Company.

On March 28, 2011, in connection with the termination of a key employee, 51,433 RSUs, 54,200 stock options and cash awards of $121,300 were forfeited.

On May 4, 2011, the Compensation Committee of the Board of Directors of the Company approved the grant of (i) nonqualified stock options to purchase a total of 46,500 shares of the Company's common stock at a purchase price of $2.78 per share, the NASDAQ average price per share on that date; (ii) a total of 15,600 RSUs with a fair value of $2.78 per unit, the NASDAQ Official average price per share on that date; and (iii)) a cash-based performance award totaling $100,000 to an executive officer under the Company's 2010 Long-Term Incentive Plan. The stock options will vest and become exercisable in three equal installments in the amounts of 33% on each of the first and second anniversaries of the date of grant and 34% on the third anniversary of the date of grant. Further, all unvested options will fully vest and become exercisable immediately upon (i) the termination of employment by the death or the disability of the applicable employee or (ii) consummation of a change of control of the Company. The weighted average grant date fair value of the 46,500 options was $1.83 per share. The RSUs will vest and become non-forfeitable upon the third anniversary of the date of grant; and all unvested RSUs will vest immediately upon (i) the termination of employment by the death or the disability of the applicable employee or (ii) consummation of a change of control of the Company. The cash-based performance awards are contingent upon the achievement of differing levels of performance (as defined) and are measured by the level of the Company's Corporate Free Cash Flow (as defined) over a one-year Performance Period, which is defined as calendar year 2011. The awards earned, if any, will vest and become payable at the end of the Vesting Period, defined as the two calendar year period following the Performance Period. The earned awards also vest immediately upon (i) the termination of employment by the death or the disability of the applicable employee or (ii) consummation of a change of control of the Company.

The restricted stock unit and stock option activity for the six months ended June 30, 2011 was as follows:

	Restricted Stock Units					Stock Options

	Number of RSUs			Weighted Average Grant Date Fair Value		Number of Shares			Weighted Average Exercise Price
Unvested or outstanding as of December 31, 2010		350,000		$	1.81		398,000		$	11.46
Granted		129,200			2.39		537,000			2.28
Vested or exercised		(181,668	)		1.79		—			—
Expired		—			—		(65,000	)		7.30
Forfeited		(51,433	)		1.97		(54,200	)		2.32

Unvested or outstanding as of June 30, 2011		246,099		$	2.10		815,800		$	6.36

Exercisable June 30, 2011							383,000		$	10.94

Total stock compensation expense recognized during the three months ended June 30, 2011 was $106,000, including $58,000 related to stock options and $48,000 related to RSUs. During the six months ended June 30, 2011, total stock compensation expense was $405,000, including $163,000 related to stock options and $242,000 related to RSUs. Total stock compensation recognized during the three months ended June 30, 2010 was $130,000, including $23,000 related to stock options and $107,000 related to RSUs. During the six months ended June 30, 2010, we recognized stock compensation expense of $229,000, including $45,000 related to stock options and $184,000 related to RSUs.

As of June 30, 2011, we had approximately $557,000 and $444,000 of unrecognized compensation cost related to unvested stock options and RSUs, respectively, that is expected to be recognized over a weighted-average period of approximately 2.43 years and 2.34 years, respectively.

We utilize the treasury stock method in determining the dilutive effect of outstanding stock options and RSUs. Our basic earnings per share is computed as net income (loss) available to common stockholders divided by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the potential dilution that could occur from common shares issuable through stock options, RSUs, and other convertible securities utilizing the treasury stock method. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding adjusted to include the potentially dilutive effect of these occurrences. The number of additional shares is calculated by assuming that restricted stock units were converted and outstanding stock options were exercised, and that the proceeds from such activity were used to acquire shares of common stock at the average market price during the reporting period. For the three months ended June 30, 2011, unvested RSUs of 69,292 were included in the computation of diluted earnings per share, however outstanding options to purchase 815,800 shares of common stock were not included in the computation of diluted earnings per share because the effect would be anti-dilutive. For the three months ended June 30, 2010, unvested RSUs of 595,000 and outstanding options to purchase 668,000 shares of common stock were not included in the computation of diluted earnings per share because the effect would be anti-dilutive. For the six months ended June 30, 2011 and 2010, respectively, options to purchase 815,800 and 668,000 shares of common stock and RSUs of 426,000 and 595,000 were outstanding but were not included in the computation of dilutive earnings per share because the effect would be anti-dilutive.