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Note 10 - Stock Option Plan

12 Months Ended

Dec. 31, 2012

In 2004, shareholders approved the adoption of the 2004 Stock Incentive Plan of Evans & Sutherland Computer Corporation (“2004 Plan”), which expires in 2014. The 2004 Plan is a stock incentive plan that provides for the grant of options and restricted stock awards to employees and for the grant of options to non-employee directors. Under the 2004 Plan non-employee directors may receive an annual option grant for no more than 10,000 shares. New non-employee directors may receive an option grant for no more than 10,000 shares upon their appointment or election. In addition, with the adoption of this plan no additional options can be issued under any of the prior stock-based plans. The 2004 Plan establishes a minimum exercise price for options of 110% of fair market value on the date of grant. Restricted stock awards may be qualified as a performance-based award that conditions a participant’s award upon achievement by the Company or its subsidiaries of performance goals established by the Board of Directors’ Compensation Committee.

The number of shares, terms, and exercise periods of option grants are determined by the Board of Directors on an option-by-option basis. Options generally vest ratably over three years and expire ten years from the date of grant. As of December 31, 2012, options to purchase 1,604,513 shares of common stock were authorized and reserved for future grant.

A summary of activity follows (shares in thousands):

	2012		2011
		Weighted-		Weighted-
		Average		Average
	Number	Exercise	Number	Exercise
	of Shares	Price	of Shares	Price
Outstanding as of beginning of the year	1,151	$ 3.74	1,138	$ 4.29
Granted	111	0.21	101	0.88
Exercised	-	-	-	-
Cancelled	(93)	6.47	(88)	7.62
Outstanding as of end of the year	1,169	3.19	1,151	3.74

Exercisable as of end the year	991	3.68	989	4.24

The weighted average fair value of options granted during 2012 and 2011 was $0.19 and $0.80, respectively. As of December 31, 2012, options exercisable and options outstanding had a weighted average remaining contractual term of 3.9 and 4.6 years, respectively, and no aggregate intrinsic value. As of December 31, 2011, options exercisable and options outstanding had a weighted average remaining contractual term of 4.1 and 4.7 years, respectively, and an aggregate intrinsic value of $6 and $8, respectively.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for the grants made in 2012 and 2011:

	2012	2011
Expected life (in years)	4.0	3.5
Risk free interest rate	0.36%	1.03%
Expected volatility	396%	357%
Dividend yield	-	-

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

As of December 31, 2012, there was approximately $21 of total unrecognized share-based compensation cost related to grants under the plans that will be recognized over a weighted-average period of 2 years.

Share-based compensation expense, from awards under the 2004 Plan for the years ended December 31, 2012 and 2011 amounted to $33 and $48, respectively, and was recorded as general and administrative expense.