Stock Option Plan

9 Months Ended

Sep. 28, 2012

Stock Option Plan:

Stock Option Plan

3.       STOCK OPTION PLAN

As of September 28, 2012, options to purchase 1,600,712 shares of common stock under the Company’s stock option plan were authorized and reserved for future grant.  A summary of activity in the stock option plan for the nine months ended September 28, 2012 follows (shares in thousands):

		Weighted-
		Average
	Number	Exercise
	of Shares	Price
Outstanding at beginning of the period	1,151	$      3.74
Granted	101	0.23
Exercised	-	-
Forfeited or expired	(90)	6.59
Outstanding at end of the period	1,162	3.22
Exercisable at end of the period	994	$      3.68

As of September 28, 2012, options exercisable and options outstanding had a weighted average remaining contractual term of 4.1 and 4.8 years, respectively, and no aggregate intrinsic value.

The Black-Scholes option-pricing model is used to estimate the fair value of options under the Company’s stock option plan. The weighted average values of employee stock options granted under the stock option plan, as well as the weighted average assumptions used in calculating these values during the first nine months of 2012, were based on estimates at the date of grant as follows:

Risk-free interest rate	0.36%
Dividend yield	0.00%
Volatility	396.00%
Expected life (in years)	3.50

Expected option life and volatility are based on historical data of the Company.   The risk-free interest rate is calculated based on the average US Treasury Bill rate that corresponds with the option life.  Historically, the Company has not declared dividends and there are no foreseeable plans to do so.

As of September 28, 2012, there was approximately $28 of total unrecognized share-based compensation cost related to grants under the plan that will be recognized over a weighted-average period of 2.2 years.

Share-based compensation expense included in selling, general and administrative (excluding pension) expense in the statements of operations and comprehensive loss for the three and nine months ended September 28, 2012 was approximately $8 and $25, respectively.  Share-based compensation expense included in selling, general and administrative (excluding pension) expense in the statements of operations and comprehensive loss for the three and nine months ended September 30, 2011 was approximately $14 and $35, respectively.