On September 18, 2003, the Company adopted a new stock option plan (the “2003 Plan”) that provides for the grant of incentive stock options and nonqualified stock options, and reserved 450,000 additional shares of the Company’s common stock for future issuance under the plan. The 2003 Plan was subsequently amended to increase the number of shares reserved for issuance thereunder to 670,000. During 2008, the 2003 Plan was further amended to increase the number of shares reserved for issuance to 810,000. In the first quarter of 2010, the 2003 Plan was further amended to increase the number of shares reserved for issuance thereunder to 1,160,000. The option price of incentive stock options must be at least 100% of market value at the date of the grant and incentive stock options have a maximum term of 10 years. Options granted typically vest ratably over a three-year period or based on achievement of performance criteria. The Company grants selected executives and other key employees share option awards, whose vesting is contingent upon meeting various departmental and company-wide performance goals including meeting sales targets and net profit targets. In March 2009, the Company amended the 2003 Plan to extend the post-service termination exercise period of nonstatutory stock options granted to directors for their service to the Company as directors from three months after the director’s termination date to the tenth anniversary of the date of grant. The 2003 Plan does not contain any provisions which would trigger automatic vesting upon a change in control. The Board has determined that no awards will be made pursuant to the 2003 Plan in the future. As of December 31, 2013, 406,353 shares of common stock were vested and exercisable under the 2003 Plan.

The average fair value of options granted at market during 2012 and 2011 was $0.39 and $2.24 per option, respectively. The total intrinsic value of options exercised during the years ended December 31, 2013 was $95,000. No options were exercised in 2012 and 2011. The aggregate intrinsic value of the outstanding options at December 31, 2013 was $98,000. At December 31, 2013, there were 407,020 options outstanding under both plans.

The following table summarizes activity of the stock option plans:

A summary of the non-vested shares as of December 31, 2013 and changes during the year ending December 31, 2013 is presented below:

As of December 31, 2013, the total future compensation cost related to non-vested stock option awards is estimated to be nominal for the years ending December 31, 2014 and 2015 respectively.

The total fair value of shares vested during the years ended December 31, 2013, 2012 and 2011 was approximately $2,000, $158,000 and $253,000, respectively.

Prior to 2012 Company granted selected executives and other key employees share option awards, whose vesting is contingent upon meeting various departmental and company-wide performance goals including meeting sales targets and net profit targets. No performance options were granted during 2013 and 2012. The grant date weighted average fair value of performance options granted during 2011 was $2.49. As of December 31, 2013, there was no unrecognized compensation cost related to non-vested performance options. A summary of activity of options that vested upon achievement of certain performance criteria under the 2003 Plan as of December 31, 2013 and changes during the year then ended is presented below. These shares were also included in the summary of activity of stock option plans for the year ended December 31, 2013 above.

At the stockholder meeting on May 15, 2013, shareholders approved the 2013 Stock Incentive Plan (the “2013 Plan”). An aggregate of 2,000,000 shares of the Company’s common stock may be issued pursuant to the 2013 Plan to officers, employees, non-employee directors and consultants of the Company and its affiliates. Awards under the plan may be in the form of stock options, which may constitute incentive stock options, or non-qualified stock options, restricted shares, restricted stock units, performance awards, stock bonus awards, share appreciation rights and other stock based awards. Stock options will be issued at an exercise price not less than 100% of the market value at the date of grant and expire no later than ten years after the date of grant. Through December 31, 2013, no stock options have been awarded under the plan. Stock awards typically vest over three years but vesting periods for non-employees may vest for longer periods or based on the achievement of performance goals.

The weighted average term of employee restricted stock is three years. During the year ended December 31, 2013, the Company issued 1,257,500 restricted shares under the 2013 Plan to employees and non-employee service providers of which 26,000 were forfeited. At December 31, 2013, 768,500 shares are available for issuance under the 2013 Plan. Unrecognized compensation expense for employee restricted stock grants outstanding at December 31, 2013 amounted to $1,019,000. The weighted average grant date fair value is $1.94 per share.

Stock-based compensation expense for employees recognized in the accompanying statements of operations for the years ended December 31, 2013, 2012 and 2011 was $302,000, $45,000 and $301,000, respectively. Stock-based compensation recorded with respect to non-employee service providers during the year ended December 31, 2013 was $506,000. There was no such compensation recorded for years ended December 31, 2012 and 2011.