STOCK BASED COMPENSATION

6 Months Ended

Jun. 30, 2012

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

5.STOCK BASED COMPENSATION

Our stock based compensation programs consist of stock option and restricted stock grants made to employees and directors.

Stock Compensation Expense

Stock compensation expense for the six months ended June 30, 2012 and 2011 was $312,000 and $580,000, respectively. Stock compensation expense is recorded as a component of general and administrative expenses for each period. The Company did not recognize a tax benefit from the stock compensation expense because the Company considers it is more likely than not that the related deferred tax assets, which have been reduced by a full valuation allowance, will not be realized.

On June 4, 2012, the date of the Company’s annual meeting of stockholders, each of the three non-employee directors of the Company were granted 50,000 shares of restricted common stock of the Company under the Amended and Restated 2004 Directors’ Stock Option and Restricted Stock Plan (the “Amended 2004 Directors’ Plan”) in lieu of the annual stock option grants made in connection with the annual meeting.  The restricted shares and the stock option grant shares vest at the rate of 25% per year on the anniversary date of the grant date.  At June 30, 2012, 1,206,250 shares were available for future stock option and restricted share grants under the Amended 2004 Directors’ Plan.  The Company recognized stock compensation expense for the restricted share of $6,000 in the second quarter of 2012 in connection with these grants.

On June 4, 2012 the Company’s Executive Chairman was granted 50,000 shares of restricted common stock of the Company under the Company’s 2007 Restricted Stock Plan.  The restricted shares vest at the rate of 25% per year on the anniversary date of the grant date.  The Company recognized stock compensation expense for the restricted share of $1,900 in the second quarter of 2012 in connection with this grant.

Effective June 4, 2012, Leland O. Erdahl ceased to be a member of the Board of Directors as he elected not to run for reelection at the 2012 annual meeting of stockholders. On that date, the terms of the equity awards granted to Mr. Erdahl were modified resulting in immediate vesting of all unvested stock options and restricted stock grants and an extension of his stock options’ expiration dates to June 4, 2013.  The Company recognized stock compensation expense for the modifications of approximately $23,000 during the first six months of 2012.

A total of 100,571 shares of restricted stock were granted on March 30, 2012 to the President/CEO.  This grant was made in connection with 2011 performance criteria in accordance with his employment agreement.  The Company recognized stock compensation expense for the restricted share grants of $92,000 in the first six months of 2012 in connection with this issuance.

A total of 56,700 shares of restricted stock were granted on March 30, 2012 to the four other executive officers.  This grant was made in connection with 2011 performance criteria in accordance with the Company’s Long Term Incentive Plan.  The Company recognized stock compensation expense for the restricted share grants of $3,000 in the first six months of 2012 in connection with this issuance.

In connection with the June 2011 annual meeting of the stockholders, on June 7, 2011 each of the three non-employee directors of the Company were granted 33,333 shares of restricted common stock of the Company and an option to purchase 16,667 shares of common stock under the Amended 2004 Directors’ Plan in lieu of the annual stock option grants made in connection with the annual meeting.  Both the restricted shares and the stock option grant shares vest at the rate of 25% per year on the anniversary date of their grant date.    The Company recognized stock compensation expense for the restricted share and stock option grants of $3,600 in the second quarter of 2011 in connection with these grants.

On June 7, 2011 the Company’s Executive Chairman was granted 33,333 shares of restricted common stock of the Company and an option to purchase 16,667 shares of common stock under the Company’s 2004 Stock Incentive Plan.  Both the restricted shares and the stock option grant shares vest at the rate of 25% per year on the anniversary date of the grant date.  The Company recognized stock compensation expense for the restricted share and stock option grants of $1,200 in the second quarter of 2011 in connection with these grants.

A total of 42,553 shares of restricted stock were issued on January 3, 2011 to the President/CEO.  This grant was made in connection with 2010 performance criteria in accordance with his employment agreement.  The Company recognized stock compensation expense for the restricted share grants of $140,000 in the first quarter of 2011 in connection with this issuance.

The total estimated unrecognized compensation cost from all unvested stock options and restricted stock grants at June 30, 2012 was approximately $387,000, which is expected to be recognized over the weighted average vesting period of the individual grants which range from 1-3 years.

Stock Options for the Six Months Ended June 30, 2012

The following table summarizes stock options outstanding and changes during the six month period ended June 30, 2012:

	Outstanding Options
	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term —in years	Aggregate Intrinsic Value
Options outstanding at January 1, 2012	2,985,231	$	2.59
Granted	—	—
Exercised	—	—
Canceled or forfeited	—	—
Options outstanding at June 30, 2012	2,985,231	$	2.59	3.5	$	—
Options exercisable at June 30, 2012	2,894,399	$	2.62	3.4	$	—

Shares available for grant under the Stock Option Plans as of June 30, 2012 were 2,414,291.

Stock options outstanding and currently exercisable at June 30, 2012 are as follows:

	Options Outstanding				Options Exercisable
Stock Option Plan	Number of Options Outstanding	Weighted Average Remaining Contractual Life	Weighted Average Exercise price		Number of Options Exercisable	Weighted Average Exercise Price
		(in years)
1995 Stock Incentive Plan	1,834,062	2.1	$	1.31	1,834,062	$	1.31
2004 Stock Incentive Plan	407,418	6.1	3.45		366,586	3.72
2004 Directors’ Plan	743,751	5.4	5.26		693,751	5.52
	2,985,231	3.5	$	2.59	2,894,399	$	2.62