Annual report pursuant to section 13 and 15(d)

STOCK BASED COMPENSATION (Tables)

STOCK BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2012

Assumptions used to value the options granted

The Company estimates fair value of stock options using the Black-Scholes valuation model. Assumptions used to estimate the fair value of stock options granted include the exercise price of the award, the expected term, the expected volatility of the Company's stock over the option's expected term, the risk-free interest rate over the option's expected term, and the expected annual dividend yield. The fair value of the employee and director stock options granted and the related assumptions used in the Black-Scholes option pricing model used to value the options granted for fiscal year 2012, 2011, and 2010 were as follows after giving effect to the reverse stock split:

		Employee Stock Option Granted
		For Year Ended
	2012(4)		2011			2010(4)
Weighted-average fair value per share	$	—	$	4.10		$	—
Risk -free interest rate (1)		—		1.29%-1.92	%		—
Expected volatility of stock (2)		—		58.72%-60.02	%		—
Dividend yield		—	None				—
Expected option life (in years) (3)		—		6.0			—

	Outside Director Stock Option Granted
	For Year Ended
	2012			2011			2010
Weighted-average fair value per share	$	3.55		$	4.70		$	5.60
Risk -free interest rate (1)		1.75	%		2.29	%		2.52	%
Expected volatility of stock (2)		56.74	%		57.48	%		60.69	%
Dividend yield	None			None			None
Expected option life (in years) (3)		10.0			10.0			10.0

(1)

The risk-free interest rate is based on the U.S. Treasury yield in effect at the grant date over the expected term of the option.

(2)

The expected volatility is based on historical volatility from our traded Common Stock over the expected term of the option.

(3)

The expected option life is based on historical exercises and post-vesting data.

(4)

No employee option grants were made in 2012 and 2010.

Stock-based compensation recognized for employee and director stock options

The following table summarizes stock-based compensation recognized for the fiscal year 2012, 2011, and 2010 after giving effect to the reverse stock split.

	Year Ended
	2012		2011		2010
Employee Stock Options	$	140,000	$	246,000	$	276,000
Director Stock Options		51,000		99,000		67,000
Total	$	191,000	$	345,000	$	343,000

- Definition

Tabular disclosure of the allocation of equity-based compensation costs to a given line item on the balance sheet and income statement for the period. This may include the reporting line for the costs and the amount capitalized and expensed.

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