6.	Common Stockholders' Equity

Stock Plans

The Company maintains several stock incentive plans, including those described below, under which non-qualified stock options, incentive stock options and restricted stock are granted to employees and non-employee directors. The Company issues new shares of common stock upon exercise of stock options. Under the terms of the Company's stock incentive plans, subject to certain limitations, employees and directors may be granted options to purchase the Company's common stock at an exercise price equal to the market price on the date the option is granted.

On May 26, 2010, the shareholders approved the 2010 Stock Incentive Plan (the “2010 Plan”), as recommended by the Company's board of directors. The 2010 Plan provides for grants of stock options, restricted stock, restricted stock units, performance awards and stock appreciation rights. While incentive stock options may only be granted to employees, awards other than incentive stock options may be granted to employees and directors. The 2010 Plan is administered by the compensation committee of the board of directors (“Compensation Committee”), which determines the grantees, the number of shares of common stock for which options are exercisable and the exercise prices of such options, and the terms and conditions of other equity-based awards under the 2010 Plan. Options granted to the Company's employees generally vest over a five-year period and remain exercisable until ten years from the date of grant. Up to 750,000 shares of common stock may be issued under the 2010 Plan. As of June 30, 2011, the 2010 Plan had 645,400 shares available for future stock-based awards.

The Company maintains the 2002 Stock Option Plan (the “2002 Plan”) under which non-qualified stock options and incentive stock options were granted to employees and non-qualified stock options were granted to non-employee directors and independent consultants or advisors. Options granted to the Company's employees generally vest over four or five years while options granted to the Company's directors generally became exercisable within three months following the grant date. Vested options generally remain exercisable until ten years from the date of grant. The Compensation Committee administers the 2002 Plan.

The Company also maintains the 2007 Stock Incentive Plan (the “2007 Plan”) under which grants of stock options and restricted stock were made to the Company's employees and restricted stock grants were made to the Company's directors. Options granted to the Company's employees generally vest over a five-year period and remain exercisable until ten years from the date of grant. The 2007 Plan is administered by the Compensation Committee.

With the approval of the 2010 Plan, no further grants of stock options or similar stock awards may be made under either the 2007 Plan or the 2002 Plan, but the provisions of these plans will remain in effect until all outstanding options are terminated or exercised.

Restricted Stock Grant

Beginning with the 2011 Annual Meeting of Shareholders, each non-employee director will receive an annual grant of shares of the Company's common stock with a fair value equivalent to $25,000 upon election at the Annual Meeting of Shareholders. On May 25, 2011, the board of directors approved, under the 2010 Plan, an annual grant of 2,700 shares of fully-vested Common Stock to each non-employee director. On May 26, 2010, the board of directors approved, under the 2007 Plan, an annual grant of 3,000 shares of fully-vested Common Stock to each non-employee director. In conjunction with these stock grants, the Company issued 16,200 and 18,000 shares of Common Stock in 2011 and 2010, respectively. The Company recognized stock-based compensation of $164,000 and $61,000 during the three months ended June 30, 2011 and 2010, respectively, related to these awards.

Stock Option Activity

The Company recognized stock-based compensation associated with its stock option grants of $29,000 and $11,000 for the three months ended June 30, 2011 and 2010, respectively, and $68,000 and $13,000 for the six month periods ended June 30, 2011 and 2010, respectively. At June 30, 2011, the total unrecognized stock-based compensation associated with unvested option grants was approximately $525,000, which is expected to be recognized over a period of approximately 4.0 years.

Presented below is a summary of the Company's stock option plan activity:

	Options			Weighted Average Exercise Price		Aggregate Intrinsic Value
	(in thousands)			(per share)		(in thousands)

Outstanding at December 31, 2010		219		$	3.14	$	931

Granted		45			9.29
Exercised		(4	)		3.15

Outstanding at June 30, 2011		260		$	4.20	$	1,177

Exercisable at June 30, 2011		72		$	2.13	$	467

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A total of 21,100 and 28,600 stock options vested in the three and six month periods ended June 30, 2011, respectively. No stock options vested during the three month period ended June 30, 2010, and 7,500 stock options vested during the six month period ended June 30, 2010. The total intrinsic value of stock options exercised during the six month periods ended June 30, 2011 and 2010 was $25,000 and $31,000, respectively.

In conjunction with the exercise of stock options under the Company's stock option plans during the six months ended June 30, 2011 and 2010, the Company issued 4,000 shares and 13,000 shares, respectively, of common stock and received proceeds on exercise totaling $13,000 and $23,000, respectively.

The following table summarizes information for options outstanding and exercisable at June 30, 2011:

					Outstanding						Exercisable
Range of Exercise Prices					Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life		Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
					(in thousands)		(per share)		(in years)		(in thousands)		(per share)		(in years)

$	1.25	to	$	2.00		37	$	1.37		6.1		22	$	1.46		5.1
$	2.01	to	$	3.00		126		2.36		7.7		42		2.36		5.4
$	3.01	to	$	3.15		8		3.15		3.9		8		3.15		3.9
$	6.88	to	$	6.88		44		6.88		9.4		-		N/A		N/A
$	9.28	to	$	9.35		45		9.29		9.9		-		N/A		N/A

$	1.25	to	$	9.35		260	$	4.20		8.0		72	$	2.13		5.2

N/A - Not applicable

Performance Share Activity

During the second quarter of 2011, the Compensation Committee approved, under the 2010 Plan, the grant of performance shares to selected executives with vesting contingent upon meeting various Company-wide performance goals. The performance goals are tied to target amounts of the Company's adjusted EBITDA and net sales for the three fiscal years ending December 31, 2013. The awards earned will range from zero to one hundred percent of the targeted number of performance shares for the performance period ending March 31, 2014. Awards, if earned, will be paid in shares of common stock. Compensation expense for performance based shares is estimated based on an assessment of the probability that performance goals will be met during the vesting period. We will re-measure the probability of achieving the performance goals during each reporting period. In future reporting periods, if we determine that performance goals are not probable of occurrence, no compensation expense will be recognized and any previously recognized compensation cost would be reversed.

A summary of the activity for performance share awards as of June 30, 2011 and changes during the six month period then ended is presented below:

	Shares		Weighted Average Grant- Date Fair Value
	(in thousands)		(per share)

Nonvested performance shares at December 31, 2010		-	$	-

Granted		68	$	9.29

Nonvested performance shares at June 30, 2011		68	$	9.29

The compensation expense for the Company's performance share awards totaled $17,000 for the three and six month periods ended June 30, 2011. The value of the performance shares granted in 2011 is being amortized as compensation expense over the service period.

At June 30, 2011, the Company had $551,000 of total unrecognized compensation expense related to performance shares that will be recognized over a period of 2.8 years.