On September 18, 2003, the Company adopted a 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 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 ten years. Options granted typically vest ratably over a three-year period or based on achievement of performance criteria. The Company has granted selected executives and other key employees share option awards, whose vesting is contingent upon meeting various departmental and company-wide performance goals including sales targets and net profit targets. As of June 30, 2014, 398,535 shares of common stock were vested and exercisable under the 2003 Plan, while 53,167 shares remained unvested. In 2009, the Company amended the 2003 Plan to extend the post-service termination exercise period of non-statutory 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 Company’s Board of Directors has determined that no awards will be made pursuant to the 2003 Plan in the future.

At the stockholder meeting on May 15, 2013, shareholders approved the 2013 Stock Incentive Plan (the “2013 Plan”) On May 12, 2014 the stockholders approved an amendment to increase the number of shares of the Company’s common stock that may be awarded under the plan by 1,000,000 shares. Accordingly, an aggregate of 3,000,000 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. 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 following table summarizes activity in the stock option plans:

During the three months, ended June 30, 2014, options to purchase 52,500 shares of the Company’s common stock were granted and no options were exercised. No options were granted or exercised during the three months ended June 30, 2013. The aggregate intrinsic value of the outstanding exercisable options at June 30, 2014 and December 31, 2013 was $0 and $98,000, respectively.

The weighted average vesting 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 36,000 were subsequently forfeited. The weighted average grant date fair value for shares issued in 2013 was $1.94 per share. During the three months ended June 30, 2014, 7,000 shares were forfeited and 853,500 were granted. At June 30, 2014, 951,000 shares were available for issuance under the 2013 Plan. Unrecognized compensation expense for employee restricted stock grants outstanding at June 30, 2014 and December 31, 2013 amounted to $2,273,000 and $1,019,000, respectively. Stock-based compensation expense for employees recognized in the accompanying statements of operations for the three months ended June 30, 2014 was $229,000 and $361,000, respectively. Stock-based compensation expense for employees recognized in the accompanying statements of operations for the six months ended June 30, 2013 was $509,000 and $701,000, respectively.