Indicate by check mark whether the ~~Registrant~~registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See ~~definition~~definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~ ¨ ~~Accelerated filer~~ x ~~Non-accelerated filer~~ ¨

~~(Do not check if a smaller reporting company) Smaller reporting company~~ ¨

The aggregate market value of the ~~voting stock~~registrant’s Common Stock held by non-affiliates of the ~~Registrant was $301,782,484 based on the closing sale price~~registrant as of ~~the Registrant’s common stock on The NASDAQ Global Market on~~June 30, 2012, the last business day of the ~~Registrant’s~~registrant’s most recently completed second fiscal ~~quarter. Shares~~quarter, was approximately $171.6 million.

As of March 6, 2013, the ~~Registrant’s~~registrant had 12,879,757 shares of its common stock ~~beneficially owned by each executive officer~~issued and director of the Registrant and by each person known by the Registrant to beneficially own 10% or more of its outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

~~At May 12, 2010, the Registrant had 120,396,971 shares of common stock outstanding, $.001 par value per share.~~

outstanding.

Part III of the registrant’s Form 10-K ~~and~~incorporates by reference information from the registrant’s proxy statement to update the exhibits to include new Certifications of our Interim Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Except as specified above, the Original Filing continues to speak as of the date of the Original Filing.

~~This Amendment should~~ be ~~read in conjunction with the Original Filing and the Company’s other filings made~~filed with the Securities and Exchange Commission ~~(“SEC”) subsequent to~~in connection with the ~~filing~~solicitation of proxies for the ~~Original Filing.~~

i

registrant’s 2013 Annual Meeting of Stockholders.

Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth in the “Risk Factors” section in Part I, Item 1A of this Annual Report on Form 10-K and elsewhere in this document. In evaluating our business, current and prospective investors should consider carefully these factors in addition to the other information set forth in this document.

On December 7, 2010, our Board of Directors approved a change in our fiscal year-end from March 31 to December 31. As a result of this change, we had a nine-month transition period from April 1, 2010 to December 31, 2010 (the “Transition Period”). References in this Annual Report on Form 10-K to “fiscal year 2012” or “fiscal 2012” refers to the calendar year of January 1, 2012 to December 31, 2012. References in this Annual Report on Form 10-K to “fiscal year 2011” or “fiscal 2011” refers to the calendar year of January 1, 2011 to December 31, 2011.

At the close of business on October 3, 2011, we effected a reverse split (the “Reverse Split”) immediately followed by a forward split (the “Forward Split” and together with the Reverse Split, the “Reverse/Forward Split”). At our 2011 annual stockholders meeting, our stockholders approved a proposal authorizing our Board of Directors (the “Board”) to effect the reverse/forward stock split at exchange ratios determined by the Board within certain specified ranges.

The exchange ratio for the Reverse Split was 1-for-500 and the exchange ratio for the Forward Split was 50-for-1. As a result of the Reverse Split, stockholders holding less than 500 shares (the “Cashed Out Stockholders”) were entitled to a cash payment for all of their shares. All remaining stockholders following the Forward Split (the “Remaining Stockholders”) were also entitled to a cash payment for any fractional shares that they would otherwise have received. The cash payment that each Cashed Out Stockholder or Remaining Stockholder was entitled to receive was based upon such stockholder’s pro rata share of the total net proceeds received in the sale of the aggregated fractional shares by our transfer agent at prevailing prices on the open market.

As a result of the Reverse/Forward Split, our common stock outstanding went from 108,868,286 shares at September 30, 2011 to 10,886,829 shares at October 3, 2011. All shares outstanding and per share information for the previous financial periods being reported in this Annual Report on Form 10-K have been adjusted to reflect the Reverse/Forward Split.

We were incorporated in 1981 in California under the name Adaptec, Inc., (“Adaptec”), and completed our initial public offering in 1986. In March 1998, we reincorporated in Delaware. On June 22, 2010, we changed our name to ADPT Corporation (“ADPT”). On October 3, 2011, we changed our name to Steel Excel Inc. (“Steel Excel”).

Through September 2010, we provided enterprise-class external storage products, including Application Specific Integrated Circuits, or ASICs, and software to original equipment manufacturers. Currently, we are primarily focused on capital redeployment and identification of new business operations in which we can utilize our existing working capital and maximize the use of our net tax operating losses (“NOLs”) in the future. The identification of new business operations includes, but is not limited to, the oilfield services, sports, training, education, entertainment, and lifestyle businesses. During our fiscal year ended December 31, 2012, we acquired two oilfield services businesses (Eagle Well Services and Sun Well Service, Inc.) and two sports-related businesses (CrossFit South Bay and CrossFit Torrance). During our fiscal year ended December 31, 2011, we acquired two sports-related businesses (Baseball Heaven and The Show) and one oilfield services business (Rogue Pressure Services Ltd). We currently operate in these two reportable segments, Steel Sports and Steel Energy, but may add other segments in the future depending upon acquisition opportunities to further redeploy our working capital.

On February 9, 2012, we acquired the business and assets of Eagle Well Services, Inc., which after the transaction operated as Well Services Ltd. (“Well Services”). Well Services is a leader in the oilfield service industry serving customers in the Bakken basin of North Dakota and Montana. The purchase price was $48.1 million in cash.

On May 31, 2012, we completed our acquisition of SWH, Inc. (“SWH”), the parent company of Sun Well Service, Inc. (“Sun Well”) and a subsidiary of BNS Holding, Inc. (“BNS”). Sun Well is a provider of premium well services to oil and gas exploration and production companies operating in the Williston Basin of North Dakota and Montana.

Pursuant to the terms of the Share Purchase Agreement, we acquired all of the capital stock of SWH for an acquisition price aggregating $68.7 million. The aggregate acquisition price consisted of the issuance of 2,027,500 shares of our common stock (valued at $30 per share) and cash of $7.9 million. Affiliates of Steel Partners Holdings L.P. (“Steel Partners”) owned approximately 40% of our outstanding common stock and 85% of BNS prior to the execution of the Share Purchase Agreement.

As a result of the acquisition and additional shares acquired on the open market, Steel Partners beneficially owned approximately 51.1% of our outstanding common stock. Both BNS and we appointed a special committee of independent directors to consider and negotiate the transaction because of the ownership interest held by Steel Partners in each company.

On May 31, 2012, the business of Well Services was combined with Sun Well and both businesses now operate as Sun Well and are included in Steel Energy.

On November 5, 2012, we acquired 50% of CrossFit South Bay for $82,500 and 50% of the newly formed CrossFit Torrance. As part of the transaction, we also agreed to loan CrossFit Torrance up to $1.1 million to fund leasehold improvements and equipment. Both CrossFit companies provide strength and conditioning services and are included in Steel Sports.

On January 30, 2013, we acquired a 40% membership interest in Again Faster LLC (“Again Faster”) for a cash price of $4.0 million. On January 31, 2013, we acquired a 20% membership interest in Ruckus Sports LLC (“Ruckus”) for a cash price of $1.0 million, with the right to acquire up to 60% at the same valuation. Again Faster and Ruckus provide a wide variety of fitness and athletic products and services.

Our sales and marketing activities are performed through our local operations in each geographic region within the United States. We believe our local personnel can more effectively target marketing activities because they have an excellent understanding of region-specific issues and customer operations.

Our Steel Energy segment customer base is concentrated and the loss of a significant customer could cause our revenue to decline substantially. We have two customers that made up 10% or more of our net revenues in fiscal 2012, Continental Resources, Inc. (11%) and Zenergy, Inc.(11%), , and our top 15 Steel Energy customers made up 86% of net revenues in fiscal 2012. No customers comprised 10% or more of our net revenues in fiscal 2011.

Our Steel Energy businesses operate in a highly competitive industry that is influenced by price, capacity, reputation and experience. Because oil and natural gas prices and drilling activities are at high levels and service companies are seeing increased demand for their services and attractive returns on investment, oilfield services companies are ordering new equipment to expand their capacity. To be successful, we must provide services that meet the specific needs of oil and gas exploration and production companies at competitive prices. In addition, a safe and well-trained work force provides a competitive advantage. We strive to provide high-quality services and value to our customers by combining our state of the art equipment with highly-skilled and experienced personnel.

Our services are affected by seasonal factors, such as inclement weather, fewer daylight hours, and holidays during the winter months. Heavy snow, ice, wind or rain can make it difficult to operate and to move equipment between work sites, which can reduce our ability to provide services and generate revenues. These seasonal factors affect our competitors as well. Demand for services in our industry as a whole, fluctuates with the supply and demand for oil and natural gas. In general, as demand exceeds supply, the need for our services increases. The oil and natural gas producers attempt to take advantage of a higher-priced environment when demand exceeds supply, which leads to the need for our services. Conversely, as supply equals or exceeds demand, the oil and natural gas producers become more risk-intolerant and will cut back on their well servicing needs.

Similar to our Steel Energy businesses, Baseball Heaven is affected by seasonal factors, such as inclement weather and fewer daylight hours. Our facilities at Baseball Heaven currently do not include indoor fields so if it rains or snows, scheduled tournaments or clinics must be canceled, which reduces our revenues. As an example, Hurricane Sandy in October 2012 resulted in the cancellation of scheduled tournaments. We are currently constructing an indoor facility to increase utilization rates. CrossFit South Bay and Torrance are expected to be less affected by seasonal factors but will have to compete against other established gyms in the area.

Our operations are subject to multiple federal, state and local laws and regulations pertaining to worker safety, the handling of hazardous materials, transportation standards and the environment. We cannot predict the level of enforcement or the interpretation of existing laws and regulations by enforcement agencies in the future, or the substance of future court rulings or permitting requirements. In addition, we cannot predict what additional laws and regulations may be put in place in the future, or the effect of those laws and regulations on our business and financial condition. We believe we are in substantial compliance with applicable environmental laws and regulations. While we do not believe that the cost of compliance is material to our business or financial condition, it is possible that substantial costs for compliance or penalties for non-compliance may be incurred in the future.

Among other environmental laws, we are subject to the Clean Water Act that establishes the basic structure for regulating discharges of pollutants into the waters of the United States and quality standards for surface waters. Our operations could require permits for discharges of wastewater and/or stormwater. In addition, the Oil Pollution Act of 1990 imposes a multitude of requirements on responsible parties related to the prevention of oil spills and liability for damages resulting from such spills in the waters of the United States. These and similar state laws provide for administrative, civil and criminal penalties for unauthorized discharges and impose stringent requirements for spill prevention and response planning, as well as considerable potential liability for the costs of removal and damages in connection with unauthorized discharges.

The Comprehensive Environmental Response, Compensation and Liability Act, as amended, and comparable state laws (“CERCLA” or “Superfund”) impose liability without regard to fault or the legality of the original conduct on certain defined parties, including current and prior owners or operators of a site where a release of hazardous substances occurred and entities that disposed or arranged for the disposition of the hazardous substances found at the site. Under CERCLA, these parties may be subject to joint and several liability for the costs of cleaning up the hazardous substances that were released into the environment and for damages to natural resources. Further, claims may be filed for personal injury and property damages allegedly caused by the release of hazardous substances and other pollutants. We may encounter materials that are considered hazardous substances in the course of our operations. As a result, we may incur CERCLA liability for cleanup costs and be subject to related third-party claims. We also may be subject to the requirements of the Resource Conservation and Recovery Act, as amended, and comparable state statutes (“RCRA”) related to solid wastes. Under CERCLA or RCRA, we could be required to clean up contaminated property (including contaminated groundwater) or to perform remedial activities to prevent future contamination.

Our operations are also subject to the Clean Air Act, as amended, and similar state laws and regulations that restrict the emission of air pollutants and impose various monitoring and reporting requirements. These laws and regulations may require us to obtain approvals or permits for construction, modification or operation of certain projects or facilities and may require use of emission controls. Various scientific studies suggest that emissions of greenhouse gases, including, among others, carbon dioxide and methane, contribute to global warming (climate change). While it is not possible to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any new restrictions on emissions that are imposed could result in increased compliance costs for, or additional operating restrictions on, our customers and hence, affect our business.

We are also subject to the federal Occupational Safety and Health Act, as amended, (“OSHA”) and comparable state laws that regulate the protection of employee health and safety. OSHA’s hazard communication standard requires that information about hazardous materials used or produced in our operations be maintained and provided to employees and state and local government authorities. We believe we are in substantial compliance with the OSHA and comparable state law requirements, including general industry standards, recordkeeping requirements and monitoring of occupational exposure to regulated substances.

As of December 31, 2012, we had 360 employees that were all located in the United States, including nine part-time employees. Baseball Heaven also employs seasonal workers when needed. We consider our employee relations to be good and we are not party to any collective bargaining agreements.

We make available free of charge through our internet website at www.steelexcel.com, the following filings as soon as reasonably practicable after they are electronically filed with or furnished to the Securities and Exchange Commission (the “SEC”): our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy, information statements and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act. The SEC also maintains a web site at www.sec.gov that contains reports, proxy and information statements, and other information that we file electronically and that may also be read and copied at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Information regarding the operation of the SEC’s Public Reference Room may be obtained by calling the SEC at 1-800-SEC-0330.

Our business faces significant risks. The risks described below may not be the only risks we face. Additional risks that we do not yet know of or that we currently think are immaterial may also impair our results of operations and financial condition. If any of the events or circumstances described in the following risks actually occurs, our business, financial condition or results of operations could suffer, and the trading price of our stock could decline.

If we fail to manage these acquisition risks successfully, our business could be harmed.

In addition, we may have imposed upon us burdensome requirements, including:

If we become subject to the Investment Company Act, compliance with these additional regulatory burdens would require additional costs and expenses. There can be no assurance that we will not be deemed an investment company, as defined under Sections 3(a)(1)(A) and (C) of the Investment Company Act or that we will qualify for the exemption under Rule 3a-2 of the Investment Company Act.

If the financial institutions that maintain our cash, cash equivalents and marketable securities experience financial difficulties, which is more likely during a weakened state of the economy, our cash balances may be adversely impacted. We maintain our cash, cash equivalents and marketable securities with certain financial institutions in which our balances exceed the limits that are insured by the Federal Deposit Insurance Corporation. If the underlying financial institutions fail or other adverse conditions occur in the financial markets, our cash balances may be impacted.

Additionally, if we underwent an ownership change, the NOLs would be subject to an annual limit on the amount of the taxable income that may be offset by our NOLs generated prior to the ownership change and we may be unable to use a significant portion or all of our NOLs to offset taxable income. We have adopted a tax benefits preservation plan and filed an amendment to our Certificate of Incorporation that restricts certain transfers of our common stock with the intention of reducing the likelihood of an ownership change. However, we cannot assure you that these measures will be effective in deterring or preventing all transfers of our common stock that could result in such an ownership change.

The amount of NOLs that we have claimed has not been audited or otherwise validated by the U.S. Internal Revenue Service, or the IRS. The IRS could challenge our calculation of the amount of our NOLs and our determinations as to when a prior change in ownership occurred, and other provisions of the Internal Revenue Code may limit our ability to carry forward our NOLs to offset taxable income in future years. If the IRS was successful with respect to any such challenge, the potential tax benefit that the NOLs would provide us could be substantially reduced.

The factors noted above may cause a higher effective tax rate that could materially affect our income tax provision, results of operations or cash flows in the period or periods for which such determination is made.

The level of oil and natural gas exploration and production activity in the United States is volatile. Steel Energy has a significant concentration of operations in North Dakota and Montana resulting from the development of the Bakken Shale Formation. Our operations will be particularly affected by the level of drilling and production in the Bakken Shale Formation. A reduction in the activity levels of our customers could cause a decline in the demand for our services and may adversely affect the prices that we can charge or collect for our services. In addition, any prolonged substantial reduction in oil and natural gas prices would likely affect oil and natural gas production levels and, therefore, would affect demand for the services we provide. A material decline in oil and natural gas prices or drilling activity levels or sustained lower prices or activity levels could have a material adverse effect on our business, financial condition, results of operations and cash flows. Moreover, reduced discovery rates of new oil and natural gas reserves, or a decrease in the development rate of reserves, in our market areas, whether due to increased governmental regulation, limitations on exploration and drilling activity or other factors, could also have a material adverse impact on our business, even in a stronger oil and natural gas price environment.

We operate in a cyclical and volatile industry. Changes in current or anticipated future prices for crude oil and natural gas are a primary factor affecting spending and drilling activity, and decreases in spending and drilling activity can cause rapid and material declines in demand for our services.

Our sports-related operations are subject to the potential for injuries by participants in tournaments, classes and clinics.

Accidents may occur, we may be unable to obtain desired contractual indemnities, and our insurance may prove inadequate in certain cases. The occurrence of an event not fully insured or indemnified against, or the failure or inability of a customer or insurer to meet its indemnification or insurance obligations, could result in substantial losses. In addition, insurance may not be available to cover any or all of these risks. Even if available, insurance may be inadequate or insurance premiums or other costs may rise significantly in the future making insurance prohibitively expensive. Moreover, our insurance coverage generally provides that we assume a portion of the risk in the form or a deductible or self-insured retention. We may choose to increase the levels of deductibles (and thus assume a greater degree of risk) from time to time in order to minimize our overall costs.

It is not possible to predict how new governmental mandates regarding the emission of greenhouse gases could affect our business; however, any such future laws or regulations could require our customers to devote potentially material amounts of capital or other resources in order to comply and increase their operating costs, which could result in decreased demand for our services. Such future laws or regulations could have a material adverse impact on our business.

Failure to comply with environmental, health and safety laws and regulations could result in the assessment of administrative, civil or criminal penalties, imposition of cleanup and site restoration costs and liens, revocation of permits, and, to a lesser extent, orders to limit or cease certain operations. Certain environmental laws impose strict and/or joint and several liability, which could cause us to become liable for the conduct of others or for consequences of our own actions that were in compliance with all applicable laws at the time of those actions.

Legislation that has been introduced in Congress to provide for broader federal regulation of hydraulic fracturing operations and the reporting and public disclosure of chemicals used in the fracturing process could be enacted. Additionally, the U.S. Environmental Protection Agency has asserted federal regulatory authority over certain hydraulic fracturing activities involving diesel fuel under the Safe Drinking Water Act and is completing the process of drafting guidance documents related to this asserted regulatory authority. If additional levels of regulation or permitting requirements were imposed through the adoption of new laws and regulations, our customers’ business and operations could be subject to delays and increased operating and compliance costs, which could negatively impact the number of active wells in the marketplaces we serve. Therefore, the adoption of future federal, state or municipal laws regulating the hydraulic fracturing process could negatively impact our business.

These constraints could reduce our revenues, delay our operations and materially increase our operating and capital costs. Unusually warm winters may also adversely affect the demand for our oilfield services by decreasing the demand for natural gas.

Rogue leases a shop facility in Williston, North Dakota from Sun Well, which is 3,200 square feet. Rogue currently leases 10 apartments for employees’ use while on location with leases that expire on or through November 30, 2016.

Sun Well owns its headquarters in Williston, North Dakota, which is 21,760 square feet. In addition, Sun Well leases 2,232 square feet of shop and storage space in Sidney, Montana, which expires March 15, 2014, and 2,205 square feet of office space in Kenmare, North Dakota, which expires March 31, 2013. Sun Well also leases a 2,400 square foot shop facility in Kenmare, North Dakota and a 1,000 square foot of shop space in Dickinson, North Dakota on a month-to-month basis.

Steel Sports, Inc, our sports-related acquisition team, leases its 2,038 square foot headquarters in Hermosa Beach, California, which expires November 30, 2014. Baseball Heaven leases 27.9 acres in Yaphank, New York where it has built four full-size and three youth-size fields along with a restaurant. Baseball Heaven recently began construction on an approximately 12,000 square foot indoor training facility on the property. The indoor training facility is expected to be completed by mid-June 2013. The Baseball Heaven lease expires December 13, 2016, with two options to extend and a first right of refusal to purchase the property. CrossFit South Bay leases a 2,300 square foot facility in Hermosa Beach, California, which expires on July 31, 2015.

From time to time, we are subject to litigation or claims, including claims related to businesses that we wound down or sold, which are normal in the course of business, and while the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial position, results of operations or cash flows. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

For an additional discussion of certain risks associated with legal proceedings, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

Not applicable.

Our common stock is currently traded in the over the counter market and is quoted on the OTCQB Market under the symbol “SXCL.” In connection with the change of our name to Steel Excel Inc. on October 3, 2011, our symbol was changed from ADPT.PK to the current symbol SXCL. In addition, until August 4, 2010, our common stock was traded on the NASDAQ Global Market. Therefore, the high and low prices shown below include the NASDAQ Global Market prices through August 4, 2010 and then include the OTCQB Market prices thereafter. Further, as indicated earlier in this Annual Report on Form 10-K, we effected the Reverse/Forward Split on October 3, 2011. The prices shown below for the date ranges prior to October 3, 2011 have been retroactively adjusted to give effect to the Reverse/Forward Split.

As of March 6, 2013, there were approximately 30 registered stockholders of record of our common stock. This number of registered holders does not include holders that have shares of common stock held for them “in street name,” meaning the shares are held for their accounts by a broker or other nominee.

We have not declared or paid cash dividends on our common stock. However, we remain committed to providing value to all of our stockholders, which may include paying cash dividends in the future.

In November 2012, our Board of Directors authorized a stock repurchase program to purchase up to 200,000 shares of our common stock. During the fiscal year ended December 31, 2012, we repurchased approximately 0.1 million shares of our common stock pursuant to the program at an average price of $24.82 for an aggregate repurchase price of $2.8 million, excluding brokerage commissions. The program has no specific expiration date.

The following performance graph compares the performance of our common stock to the Russell 2000 index and PHLX Oil Service Sector. The graph assumes that $100 was invested on March 31, 2007 and its relative performance was tracked through December 31, 2012 in our common stock and in each index.

The following selected financial information has been derived from the Consolidated Financial Statements. The information set forth below is not necessarily indicative of results of future operations and should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the audited Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K. In July 2012, we reclassified our baseball uniform and tournament business, The Show, to discontinued operations. In July 2011, we reclassified our enterprise-class external storage products business (the “Aristos Business”) to discontinued operations. We sold our data storage and software solutions and products business (the “DPS Business”) to PMC-Sierra, Inc. (“PMC-Sierra”) in June 2010 and sold our Snap Server Network Attached Storage business (the “Snap Server NAS business”) to Overland Storage, Inc. (“Overland”) in June 2008. The information below has been reclassified to reflect the DPS Business, the Snap Server NAS business, the Aristos Business, and The Show as discontinued operations and prior periods have been reclassified to conform to this presentation.

On December 7, 2010, our Board of Directors approved a change in our fiscal year-end from March 31 to December 31. As a result of this change, we had a nine-month transition period from April 1, 2010 to December 31, 2010 (the “Transition Period”). References in this Annual Report on Form 10-K to “fiscal year 2012” or “fiscal 2012” refers to the calendar year of January 1, 2012 to December 31, 2012. References in this Annual Report on Form 10-K to “fiscal year 2011” or “fiscal 2011” refers to the calendar year of January 1, 2011 to December 31, 2011.

In July 2012, we reclassified The Show to discontinued operations. In July 2011, we reclassified the Aristos Business to discontinued operations. We sold our data storage and software solutions and products business (the “DPS Business”) to PMC-Sierra, Inc. (“PMC-Sierra”) in June 2010 and sold our Snap Server Network Attached Storage business (the “Snap Server NAS business”) to Overland Storage, Inc. (“Overland”), in June 2008. Accordingly, we reclassified the consolidated financial statements and related disclosures for all periods, except for the historical Consolidated Balance Sheets and Statement of Stockholders’ Equity, to reflect these businesses as discontinued operations. These reclassifications had no impact on net loss, total assets or total stockholders’ equity. Unless otherwise indicated, the following discussions pertain only to our continuing operations.

At the close of business on October 3, 2011, we effected a reverse split (the “Reverse Split”) immediately followed by a forward split (the “Forward Split” and together with the Reverse Split, the “Reverse/Forward Split”). At our 2011 annual stockholders meeting, our stockholders approved a proposal authorizing our Board of Directors (the “Board”) to effect the reverse/forward stock split at exchange ratios determined by the Board within certain specified ranges.

The exchange ratio for the Reverse Split was 1-for-500 and the exchange ratio for the Forward Split was 50-for-1. As a result of the Reverse Split, stockholders holding less than 500 shares (the “Cashed Out Stockholders”) were entitled to a cash payment for all of their shares. All remaining stockholders following the Forward Split (the “Remaining Stockholders”) were also entitled to a cash payment for any fractional shares that they would otherwise have received. The cash payment that each Cashed Out Stockholder or Remaining Stockholder was entitled to receive was based upon such stockholder’s pro rata share of the total net proceeds received in the sale of the aggregated fractional shares by our transfer agent at prevailing prices on the open market.

As a result of the Reverse/Forward Split, our common stock outstanding went from 108,868,286 shares at September 30, 2011 to 10,886,829 shares at October 3, 2011. All shares outstanding and per share information for the previous financial periods being reported in this Annual Report on Form 10-K have been adjusted to reflect the Reverse/Forward Split.

We continue to focus on capital redeployment and identification of new business operations in which we can utilize our existing working capital and maximize the use of our net tax operating losses (“NOLs”) in the future. The identification of new business operations includes, but is not limited to, the oilfield servicing, sports, training, education, entertainment, and lifestyle businesses. For details regarding our historical business, which has been accounted for as discontinued operations, refer to Note 5 of the Notes to Consolidated Financial Statements.

We currently operate in two segments (Steel Sports and Steel Energy), but may add others in the future depending upon acquisition opportunities to further redeploy our working capital. While we have separate legal subsidiaries with discrete financial information, we have one chief operating decision maker. We currently report our business in two reportable segments, consisting of:

During our fiscal year ended December 31, 2011, we acquired two Steel Sports businesses (Baseball Heaven and The Show) and one Steel Energy business (Rogue Pressure Services). During the fiscal year ended December 31, 2012, we acquired two additional Steel Sports businesses (CrossFit South Bay and CrossFit Torrance) and two Steel Energy businesses (Eagle and Sun Well). See “Acquisitions” section later in this Item 7 for additional details.

With the Aristos reclassification to discontinued operations in July 2011, all net revenues and cost of revenues have been reclassified as discontinued operations in fiscal periods prior to the fiscal year ended December 31, 2011. As such, there is no comparative presentation of results of operations as a percentage of net revenues for any periods of 2010. In addition, all research and development expenses and sales and marketing expenses have been reclassified as discontinued operations in fiscal periods prior to the fiscal year ended December 31, 2011, so there is no comparative discussion of these areas as well.

The following table sets forth the items in the Consolidated Statements of Operations as a percentage of revenues for the fiscal years ended December 31, 2012 and 2011:

Selling, general and administrative expenses increased $18.5 million from $9.6 million in fiscal 2011 to $28.0 million in fiscal 2012. Fiscal 2012 and 2011 include sales expenditures from the recently acquired businesses, while all other periods presented include administrative expenses only. In addition, fiscal 2011 included six months of Baseball Heaven and one month or Rogue only, while fiscal 2012 includes all our newly acquired Steel Energy companies.

The decrease in administrative expense in the Transition Period compared to the nine-month period ended January 1, 2010 was primarily a result of reductions in our workforce and infrastructure spending due to a restructuring plan we implemented in fiscal 2010, which resulted in a 57% decrease in our average headcount for employees engaged in Selling, general and administrative functions. We also recorded lower stock-based compensation expense by $2.0 million in the Transition Period compared to the nine-month period ended January 1, 2010, as the nine-month period ended January 1, 2010 included stock-based compensation expense related to the modification of certain stock-based awards, and to a lesser extent, no stock-based awards were granted to employees in the Transition Period. The decrease in administrative expense in the Transition Period compared to the nine-month period ended January 1, 2010 was partially offset by cash compensation expense of $0.5 million related to the modification and settlement of certain unvested stock-based awards in the form of a fixed cash payment and expense of $0.5 million related to a discretionary bonus offered to Mr. Quicke, our Interim President and Chief Executive Officer.

There are no restructuring charges in fiscal 2012 and 2011 as all restructuring plans were put into place by the end of our Transition Period. We implemented several restructuring plans during the Transition Period and fiscal years 2010 and 2009. The goal of these plans was to bring our operational expenses to appropriate levels relative to our net revenues, while simultaneously implementing extensive company-wide expense-control programs.

The restructuring charges of $3.9 million recorded in the Transition Period primarily related to the restructuring plan implemented during the Transition Period with minimal adjustments related to prior fiscal years’ restructuring plans. The restructuring charges of $1.1 million recorded in fiscal 2010 primarily related to the restructuring plan implemented during that fiscal year with minimal adjustments related to prior fiscal years’ restructuring plans. All expenses, including adjustments, associated with our restructuring plans are included in “Restructuring charges” and “Income (loss) from discontinued operations, net of taxes” in the Consolidated Statements of Operations. For further discussion of our restructuring plans, please refer to Note 11 to the Consolidated Financial Statements.

Transition Period Restructuring Plan: In June 2010, we completed our actions and notified affected employees of the termination of their employment, primarily in engineering and general administrative functions, in connection with a restructuring plan adopted on May 6, 2010, with expected restructuring charges of $3.9 million. The execution of this restructuring plan was substantially contingent upon the sale of the our DPS Business to PMC-Sierra, which transaction was consummated on June 8, 2010, and was intended to allow us to reduce our operating expenses following such sale. Certain of the employees notified continued to provide services through December 2010 in connection with the transition services we provided to PMC-Sierra, and to a lesser extent, to assist in corporate matters, including the completion of the wind down of the Aristos Business by the end of September 2010. We incurred severance and related benefits charges of $3.7 million associated with this restructuring plan, all of which $3.7 million was recorded in the Transition Period. We also consolidated our facilities and incurred a termination fee of $0.2 million in the Transition Period upon vacating a facility in California.

As a result of our annual review of goodwill, we recorded a $0.2 million goodwill impairment charged related to Baseball Heaven in fiscal 2012.

During our review of long-lived assets in the Transition Period, we determined that an indicator was present in which the carrying value was not recoverable . We recorded an impairment charge of $4.8 million in the Transition Period to write off our intangible assets related to customer relationships and to reduce the carrying value of our property and equipment, net, to the estimated fair value based upon the market approach and in consideration of the perspective of market participants using or exchanging our long-lived assets. The write off of our intangible assets related to core and existing technologies was originally reflected in “Cost of revenues” in the Consolidated Statements of Operations, but was reclassified to “Loss from discontinued operations, net of taxes” when the Aristos Business was moved to discontinued operations in July 2011. See Notes 5 and 8 to the Consolidated Financial Statements for further discussions regarding the reclassification to discontinued operations and the impairment of our long-lived assets.

Interest income reflects interest earned on our cash, cash equivalents and marketable securities’ balances and realized gains and losses on marketable securities. Other income, net, is primarily attributable to realized gains on marketable equity securities and investments, gains from the repurchase of certain portions of our 3/4% Notes, and fluctuations in foreign currency gains or losses, and to a lesser extent, includes recorded changes in values not deemed to be other-than-temporary on non-controlling interest on certain investments as well as gains and losses on the dispositions of property and equipment. From fiscal 2011 to fiscal 2012, interest and other income, net decreased $7.3 million from $8.4 million to $$1.1 million, respectively. We expect that our interest and other income, net, will remain consistent or decline slightly in future periods primarily due to the maturity of higher yielding investments, our move to mainly government-issued securities and the use of our cash and cash equivalents to make future acquisitions.

The increase in interest and other income, net, in our fiscal 2011 compared to the Transition Period was primarily due to higher interest earned on our cash, cash equivalents and marketable securities’ balances. The decrease in interest and other income, net, in the Transition Period compared to the nine-month period ended January 1, 2010 was primarily due to lower interest earned on our cash, cash equivalents and marketable securities' balances and gains of $1.3 million recognized in the nine-month period ended January 1, 2010 related to the settlement of a class action suit and the sale of an investment.

In the Transition Period and the twelve-month period ended December 31, 2010, our tax provision included tax expenses of $7.9 million primarily due to changes in judgment related to the on-going audits in our foreign jurisdictions.

Our effective tax rates include foreign losses in jurisdictions where no tax benefit is derived, foreign taxes in jurisdictions where tax rates differ from U.S. tax rates, changes in the valuation allowance on deferred tax assets, certain state minimum taxes, dividends from foreign subsidiaries, tax benefits associated with settling certain tax disputes primarily with the United States, Singapore and German taxing authorities, releases of our Irish withholding taxes, changes in judgment related to uncertain tax positions in both the United States and foreign jurisdictions based on new information received and new uncertain tax positions that were identified. Our effective tax rates also include the Company realizing certain currency translation gains due to substantial liquidation of certain of its foreign subsidiaries and the receipt of dividends from foreign subsidiaries.

The Company continues to monitor the status of its NOLs, which may be used to offset future taxable income. If the Company underwent an ownership change, the NOLs would be subject to an annual limit on the amount of the taxable income that may be offset by its NOLs generated prior to the ownership change and additionally, the Company may be unable to use a significant portion of its NOLs to offset taxable income. For details regarding the Company’s NOL carryforwards, please refer to Note 15 of the Notes to Consolidated Financial Statements.

As of December 31, 2012, the Company’s total gross unrecognized tax benefits were $26.4 million, of which $7.4 million, if recognized, would affect the effective tax rate. There was an overall decrease of $3.5 million in the Company’s gross unrealized tax benefits from fiscal 2011 to fiscal 2012, primarily due to the reversal of reserves for foreign taxes as a result of a favorable settlement with the Singapore taxing authorities for various tax assessment years beginning in 2003.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of December 31, 2012, fiscal years 2005 onward remained open to examination by the U.S. taxing authorities and fiscal years 2000 onward remained open to examination in various foreign jurisdictions. U.S. tax attributes generated in fiscal years 2000 onward also remain subject to adjustment in subsequent audits when they are utilized.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

The loss from discontinued operations, net of taxes, for fiscal 2012 includes The Show only, which was originally acquired in August 2011. The income from discontinued operations, net of taxes, for fiscal 2011 includes the release of the $5.0 million purchase price holdback related to the sales of our DPS Business to PMC-Sierra, the sale of $1.9 million of patents related to our DPS Business, and $0.2 million of loss from The Show.

The change in discontinued operations in the Transition Period compared to nine-month period ended January 1, 2010 was primarily attributable to the gain of $10.7 million, net of taxes of $6.6 million, on the sale of the DPS Business to PMC-Sierra, which was consummated in June 2010, and was recorded in the Transition Period in “Gain on disposal of discontinued operations, net of taxes,” in the Consolidated Statements of Operations. We also recorded a gain of $0.1 million and $1.0 million in the Transition Period and nine-month period ended January 1, 2010, respectively in “Gain on disposal of discontinued operations, net of taxes,” in the Consolidated Statements of Operations related to the sale of the Snap Server NAS business with Overland. The gain recorded in the Transition Period for the sale of the Snap Server NAS business was based on the cash received in connection with the amended promissory note agreement with Overland, in which Overland was allowed to pay us the remaining $1.2 million receivable plus accrued interest by March 31, 2010. We also incurred “Income (loss) from discontinued operations, net of taxes” of $(18.1) million and $(3.3) million in the Transition Period and nine-month period ended January 1, 2010, respectively, related to the Aristos Business, DPS Business and Snap Server NAS business.

The decrease in working capital at December 31, 2012 compared to December 31, 2011 of $47.9 million is primarily attributable to our acquisitions of Sun Well, Eagle and CrossFit South Bay that were made entirely, or in part, with cash, as well as $0.3 million towards the loan to CrossFit Torrance. The decrease in working capital at December 31, 2011 compared to December 31, 2010 of $32.7 million is primarily attributable to our acquisitions of Baseball Heaven, The Show, and Rogue that were made with cash.

Net cash provided by operating activities was $18.7 million for fiscal 2012 compared to $10.8 million for fiscal 2011. The increase in cash provided by operations is primarily the result of our acquisitions of operating businesses in 2011 and 2012.

Investing activities: Investing cash activities generally consist of purchases, sales and maturities of marketable securities, net cash used for acquisitions, proceeds from the sale of our DPS Business and Snap Server NAS business (prior to fiscal 2011), proceeds from the sale of investments, and purchases of property and equipment. Net cash provided by (used in) investing activities was $50.3 million, $(40.9) million, $2.6 million, $21.1 million, and $(31.9) million in fiscal 2012, fiscal 2011, the twelve-month period ended December 31, 2010, the Transition Period, and the nine-month period ended January 1, 2010, respectively.

The investing activities of fiscal 2012 and 2011 included the acquisitions aggregating $52.6 million and $36.5 million, respectively. In the Transition Period, we received proceeds from the sale of our DPS Business to PMC-Sierra of $29.3 million. We utilized cash for the net purchases of marketable securities of $7.2 million in the Transition Period. We continue to manage our cash through interest-bearing accounts.

Financing activities: Financing cash activities consist primarily of repayments of long-term debt, repurchases of our common stock under the repurchase program, and employee stock option exercises. Net cash provided by (used in) financing activities in fiscal 2012, fiscal 2011, and the Transition Period was $6.0 million, $29,000, and $(32.5) million, respectively. In fiscal 2012, we used $3.2 million for the repayment of capital lease obligations and long-term debt we acquired through Sun Well. In fiscal 2012 and the Transition Period, we also repurchased $2.8 million and $34.7 million, respectively, of our common stock in connection with authorized stock repurchase programs.

In November 2012, our Board of Directors authorized a stock repurchase program to purchase up to 200,000 shares of our common stock. During the fiscal year ended December 31, 2012, we repurchased approximately 0.1 million shares of our common stock pursuant to the program at an average price of $24.82 for an aggregate repurchase price of $2.8 million, excluding brokerage commissions.

In July 2008, our Board of Directors authorized a stock repurchase program to purchase up to $40 million of our common stock. We announced the adoption of this program on July 31, 2008. During the Transition Period ended December 31, 2010, we repurchased approximately 1.2 million shares of our common stock at an average price of $29.30 for an aggregate repurchase price of $34.3 million, excluding brokerage commissions. This program was terminated in December 2010. Under the authorized stock repurchase program, we cumulatively repurchased approximately 1.4 million shares of our common stock for an aggregate repurchase price of $38.4 million, excluding brokerage commissions, in the open market through December 31, 2010. All numbers of shares and the average stock price were adjusted retroactively to give effect to the Reverse/Forward Split.

At December 31, 2012, we had $270.7 million in cash, cash equivalents and marketable securities, of which approximately $1.7 million was held by our foreign subsidiaries whose functional currency is the local currency. Our available-for-sale securities included short-term deposits, corporate obligations, corporate securities, commercial paper, United States government securities and mutual funds, and were recorded on our Consolidated Balance Sheets at fair market value, with their related unrealized gain or loss reflected as a component of “Accumulated other comprehensive income, net of taxes” in the Consolidated Statements of Stockholders’ Equity.

During February 2012, our Board of Directors executed a written consent permitting us to invest up to $10 million in publicly traded companies engaged in certain oilfield servicing, energy services, and related businesses, which was an exception to our investment policy at that time. In June 2012, our Board established an Investment Committee, which was formed to develop investment strategies for the Company and to set and implement investment policies with respect to our cash. The Investment Committee was directed by the Board to establish and implement an investment policy for our portfolio that meets the following general objectives: preserve principal; maximize total return given overall market conditions; meet internal liquidity requirements; and comply with applicable accounting, internal control and reporting requirements and standards. Our Investment Committee is authorized, among other things, to invest our excess cash directly or allocate investments to outside managers for investment in equity or debt securities, provided that our Investment Committee may not invest more than ~~10%~~$25 million in any single investment or with any single asset manager without our Board’s approval. Given the overall market conditions, we regularly review our investment portfolio to ensure adherence our investment policy and to monitor individual investments for risk analysis and proper valuation.

In fiscal 2012, fiscal 2011, and the Transition Period, we did not recognize a material loss on our securities as the unrealized losses incurred were deemed to be temporary. We hold our marketable securities as available-for-sale and mark them to market. We expect to realize the full value of all our marketable securities upon maturity or sale, as we have the intent and ability to hold the securities until the full value is realized. However, we cannot provide any assurance that our invested cash, cash equivalents and marketable securities will not be impacted by adverse conditions in the financial markets, which may require us to record an impairment charge that could adversely impact our financial results.

In addition, we maintain our cash, cash equivalents and marketable securities with certain financial institutions, in which our balances exceed the limits that are insured by the Federal Deposit Insurance Corporation. If the underlying financial institutions fail or other adverse conditions occur in the financial markets, our cash balances may be impacted.

We anticipate making additional acquisitions of businesses, and we may be required to use a significant portion of our available cash balances for such acquisitions or for working capital needs thereafter.

We have invested in technology companies through two venture capital funds, Pacven Walden Venture V Funds and APV Technology Partners II, L.P. At December 31, 2012 and 2011, the carrying value of such investments aggregated $1.0 million and $1.1 million, respectively, which were based on quarterly statements we receive from each of the funds. The statements are generally received one quarter in arrears, as more timely valuations are not practical. The statements reflect the net asset value, which we use to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. The assumptions we use, due to lack of observable inputs, may impact the fair value of these equity investments in future periods. While we have seen some improvement in global economic conditions, any adverse changes in equity investments and current market conditions may require us to record an impairment charge against all or a portion of these investments in the future.

As of December 31, 2012, we have $13.0 million of long-term debt and $1.4 million of capital lease obligations that will be due and payable within the next three years. These obligations are the result of our acquisition of Sun Well. Sun Well has a credit agreement with Wells Fargo Bank, National Association that includes a term loan of $20,000,000 and a revolving line of credit for up to $5,000,000. The loans are secured by the assets of Sun Well and bear interest, at the option of Sun Well, at LIBOR plus 3.5% or the greater of (a) the bank’s prime rate, (b) the Federal Funds Rate plus 1.5%, or (c) the Daily One-Month LIBOR rate plus 1.5% for base rate loans. Both options are subject to leverage ratio adjustments. The interest payments are made monthly. The term loan is repayable in $1,000,000 quarterly principal installments from September 30, 2011 through June 30, 2015. Sun Well borrowed $20,000,000 on the term loan in July 2011 and has made $7,000,000 in scheduled principal payments through December 31, 2012. Borrowings under the revolving loan, which are determined based on eligible accounts receivable, mature on June 30, 2015. There is no balance due on the revolving loan as of December, 2012. Under the agreement, Sun Well is subject to certain financial covenants, with which it was in compliance as of December 31, 2012. In February 2013, we paid an additional $10.0 million towards the principal balance of the term loan.

We believe that our cash balances will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. The consummation of multiple acquisitions in fiscal 2012 and 2011 and the anticipation of additional acquisitions in the future, prevailing economic conditions and/or financial, business and other factors beyond our control could adversely affect our estimates of our future cash requirements. As such, we could be required to fund our cash requirements by alternative financing. In these instances, we may seek to raise such additional funds through public or private equity or debt financings or from other sources. As a result, we may not be able to obtain adequate or favorable equity financing, if needed, due in part to our shares of common stock currently trading on the OTCQB Market. Any equity financing we obtain may dilute existing ownership interests, and any debt financing could contain covenants that impose limitations on the conduct of our business. There can be no assurance that additional financing, if needed, would be available on terms acceptable to us or at all.

From time to time, we are subject to litigation or claims, including claims related to businesses that we wound down or sold, which are normal in the course of business, and while the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial position, results of operations or cash flows. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

For an additional discussion of certain risks associated with legal proceedings, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

In fiscal 2010, we repurchased a total of $0.1 million at a price equal to 100% of the principal amount of the 3/4% Notes. At December 31, 2012, we had a remaining liability of $0.3 million of aggregate principal amount related to our 3/4% Notes that are due in December 2023. Each remaining holder of the 3/4% Notes may require us to purchase all or a portion of our 3/4% Notes on December 22, 2013, December 22, 2018 or upon the occurrence of a ~~registered class~~change of control (as defined in the indenture governing the 3/4% Notes) at a price equal to the principal amount of 3/4% Notes being purchased plus any accrued and unpaid interest. We may redeem some or all of the 3/4% Notes for cash at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued interest to, but excluding, the redemption date. We may seek to make open market repurchases of the remaining balance of our 3/4% Notes within the next twelve months (See Note 9 to the Consolidated Financial Statements for a detailed discussion).

Our contractual obligations at December 31, 2012 are as follows:

Our discussion and analysis of our financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Note 1 to the Consolidated Financial Statements describes the significant accounting policies essential to our Consolidated Financial Statements. The preparation of these financial statements requires estimates and assumptions that affect the reported amounts and disclosures. Although we believe that our judgments and estimates are appropriate and correct, actual future results may differ materially from our estimates.

We believe the following to be our critical accounting policies because they are both important to the portrayal of our financial condition and results of operations and they require critical management judgments and estimates about matters that are uncertain. If actual results or events differ materially from those contemplated by us in making these estimates, our reported financial condition and results of operation for future periods could be materially affected. See “Risk Factors” for certain risks relating to our future operating results.

Repairs and maintenance of property and equipment are expensed as incurred.

We regularly perform reviews of long-lived assets to determine if facts or circumstances are present, either internal or external, which would indicate that the carrying values of our long-lived assets may not be recoverable. Indicators include, but are not limited to, a significant decline in the market price of a long-lived asset, an expectation that more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life and a current period operating or cash flow loss combined with a historical or projected operating or cash flow loss.

The recoverability of the carrying value of the long-lived assets, not including goodwill, is based on the estimated future undiscounted cash flows derived from the use of the asset. If a long-lived asset is determined to be impaired, the loss is measured based on the difference between the long-lived asset’s fair value and its carrying value. The estimate of fair value of long-lived assets is based on a discounted estimated future cash flows method and application of a discount rate commensurate with the risks inherent in our current business model. Our current business model contains management’s subjective estimates and judgments; however, actual results may be materially different than the assumptions made by management.

Based on our decision to pursue the sale or disposition of assets and/or business operations in December 2009, we evaluated and recorded impairment charges in the Transition Period ended December 31, 2010 aggregating $10.2 million. Of this $10.2 million, $6.1 million related to the write-off of intangible assets and $4.1 million related to the reduction of the carrying value of property and equipment, net, to our estimated fair value. There were no impairment charges on long-lived assets recorded in fiscal 2012 and 2011.

Goodwill represents the excess of cost over the value of net assets of businesses acquired and is carried at cost unless write-downs for impairment are required. Our goodwill as of December 31, 2012 is a result of our acquisitions in fiscal 2012 and 2011. We operate under three reporting units, Sun Well, Rogue and Sports, and accordingly, our goodwill has been recorded in these respective reporting units. We evaluate the carrying value of goodwill at each reporting unit on an annual basis during the fourth quarter and whenever events and changes in circumstances indicate that the carrying amount may not be recoverable. Such indicators would include a significant reduction in its market capitalization, a decrease in operating results or deterioration of its financial position. In the fourth quarter of fiscal 2012 and 2011, we tested the goodwill acquired. In fiscal 2012, we determined the goodwill from Baseball Heaven (the Steel Sports reporting unit) was fully impaired and wrote off the $0.2 million. There was no impairment of the Sun Well and Rogue reporting units. The impairment analysis required a two-step approach and entailed certain assumptions and estimates of discounted cash flows and a residual terminal value categorized as Level 3 inputs under the fair value hierarchy. We used a discount rate of approximately 16% and assumed a multiple of EBITDA ranging from 4.6 to 6.0. There was no impairment indicated in fiscal 2011.

We must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets, tax credits, benefits, deductions and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to those uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to our tax provision in subsequent periods.

In addition, the calculation of our tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. We recognize liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on our estimate of whether, and the extent to which, additional taxes and related interest will be due. If we ultimately determine that payment of these amounts is unnecessary, we reverse the liability and recognize a tax benefit during the period in which we determine that the liability is no longer necessary. We record an additional charge in our provision for taxes in the period in which we determine that the recorded tax liability is less than we expect the ultimate assessment to be.

During the fiscal years ended December 31, 2012 and 2011, we began implementing our strategy of redeploying our working capital by making acquisitions.

On June 27, 2011, we acquired all of the net assets of Baseball Heaven for an aggregate purchase price of $6.0 million in cash. Baseball Heaven is in the business of marketing and providing baseball facility services, including training camps, summer camps, leagues and tournaments, and concession and catering events. Baseball Heaven is located in Long Island, New York and serves the northeast and mid-Atlantic areas of the United States. Baseball Heaven is included in Steel Sports.

On August 15, 2011, we acquired all of the net assets used by The Show, which we contributed to The Show in exchange for a 75% membership interest. We paid an aggregate purchase price of $1.5 million in cash for these assets. The Show is engaged in the business of outfitting little league baseball and softball players and coaches in fully licensed Major League Baseball, minor league, and college replica uniforms and sponsoring, hosting, operating, and managing baseball and softball leagues, tournaments, and other events and related websites. The Show primarily operated in New York, Texas, Oklahoma, Colorado and California, but was ultimately discontinued in fiscal 2012.

On December 7, 2011, we acquired the business and assets of Rogue, a leader in the oilfield service industry located primarily in Williston, North Dakota, while also operating in Colorado. The aggregate purchase price was $31.2 million, which includes cash of $29.0 million and a contingent consideration liability of $1.2 million pursuant to an earn-out clause based on the achievement of certain performance levels. This acquisition marked the launch of our new strategy to focus a portion of our acquisition efforts on new opportunities in the United States oilfield service industry presented by technological advances in supporting horizontal drilling and hydraulic fracturing. Rogue provides snubbing services (controlled installation and removal of all tubulars - drill strings and production strings) in and out of the wellbore with the well under full pressure, flowtesting, and hydraulic work over/simultaneous operations (allows customers to perform multiple tasks on multiple wells on one pad at the same time). Rogue is included in Steel Energy.

On February 9, 2012, we acquired the business and assets of Eagle Well Services, Inc., which after the transaction operated as Well Services. Well Services is a leader in the oilfield service industry serving customers in the Bakken basin of North Dakota and Montana. The purchase price was $48.1 million in cash.

On May 31, 2012, we completed our acquisition of SWH, the parent company of Sun Well and a subsidiary of BNS. Sun Well is a provider of premium well services to oil and gas exploration and production companies operating in the Williston Basin of North Dakota and Montana.

Pursuant to the terms of the Share Purchase Agreement, we acquired all of the capital stock of SWH for an acquisition price aggregating $68.7 million. The aggregate acquisition price consisted of the issuance of 2,027,500 shares of our common stock (valued at $30 per share) and cash of $7.9 million. Affiliates of Steel Partners owned approximately 40% of our outstanding common stock and 85% of BNS prior to the execution of the Share Purchase Agreement.

As a result of the acquisition and additional shares acquired on the open market, Steel Partners beneficially owned approximately 51.1% of our outstanding common stock. Both BNS and we appointed a special committee of independent directors to consider and negotiate the transaction because of the ownership interest held by Steel Partners in each company.

On May 31, 2012, the business of Well Services was combined with Sun Well and both businesses now operate as Sun Well and are included in Steel Energy.

On November 5, 2012, we acquired 50% of CrossFit South Bay for $82,500 and 50% of the newly formed CrossFit Torrance. As part of the transaction, we also agreed to loan CrossFit Torrance up to $1.1 million to fund leasehold improvements and equipment. Both CrossFit companies provide strength and conditioning services and are included in Steel Sports.

In July 2012, we reclassified The Show to discontinued operations as it was not meeting projections, with no expectation to perform as represented when acquired.

In July 2011, we ceased our efforts to sell or license our intellectual property from the Aristos Business and finalized the wind down of such business.

We sold the DPS Business to PMC-Sierra on June 8, 2010. The purchase price for the DPS Business was $34.3 million, of which $29.3 million was received by us upon the closing of the transaction and the remaining $5.0 million was withheld in an escrow account (“DPS Holdback”). The DPS Holdback was released to us on June 8, 2011, one year after the consummation of the sale, except for $0.1 million to provide for one disputed claim, and was recognized as contingent consideration in discontinued operations when received. The $0.1 million was received in September 30, 2011.

As such, The Show, the disposed DPS Business and wound down Aristos Business are reflected as discontinued operations in the accompanying financial statements and prior periods have been reclassified to conform to this presentation.

For a discussion of the impact of recently issued accounting pronouncement, see “Recent Accounting Pronouncements” in Note 2 to the Consolidated Financial Statements included in this Annual Report on Form 10-K.

In November 2012, the Company purchased $11.9 million face amount of 3.75% Unsecured Convertible Subordinated Debentures Due 2026 in School Specialty Inc., a market leader in school supplies and educational materials (“School Specialties”), at a total cost of $6.0 million. On January 28, 2013, School Specialties filed a Chapter 11 bankruptcy petition. Subsequently, on February 26, 2013, the Company committed to participate, with a share in the amount of approximately $22.0 million, in a $155.0 million debtor-in-possession loan to School Specialties. The Company believes the loan, in conjunction with other sources of financing, will enable School Specialties to successfully execute a plan of reorganization or other alternative transaction.

We are exposed to interest rate risk related to our investment portfolio and debt issuances. As of December 31, 2012, our available-for-sale securities, excluding those classified as cash equivalents, aggregated $251.0 million (see Note 6 to the Consolidated Financial Statements) and included corporate obligations, government agencies and United States government securities, all of which are high investment grade as specified by our investment policy. Our investment policy also limits investment concentrations, the final maturity of any investment and the overall duration of the portfolio to preserve capital, meet liquidity requirements and maximize total return. Given the overall market conditions, we regularly review our investment portfolio to ensure adherence to our investment policy and to monitor individual investments for risk analysis and proper valuation. If the yield-to-maturity on our current available-for-sale investments declines by 10%, our “Interest and other income, net” in the Consolidated Statements of Operations would be negatively impacted by approximately $0.1 million.

We consider our direct exposure to equity price risk to be minimal. We have invested in technology companies through two venture capital funds. As of December 31, 2012, the carrying value of such investments aggregated $1.0 million (see Note 7 to the Consolidated Financial Statements). We monitor our equity investments on a periodic basis, by recording these investments based on quarterly statements we receive from the funds. The statements are generally received one quarter in arrears, as more timely valuations are not practical. In the event that the carrying value of our equity ~~securities,~~investments exceeds their fair value, or the decline in value is determined to ~~file initial reports of ownership and reports of~~be other-than-temporary, the carrying value is reduced to its current fair value. While we have seen some improvement in global economic conditions, any adverse changes in ~~ownership~~equity investments and current market conditions may require us to record an impairment charge against all or a portion of the investments in the future. Such an action would adversely affect our financial results.

We translate foreign currencies into U.S Dollars for reporting purposes and currency fluctuations can have an impact on our results. For our fiscal 2012, fiscal 2011, and the Transition Period, there was no material currency exchange impact from our intercompany transactions. The amount of local currency obligations settled in any period is not significant to our cash flows or results of operations, although we continuously monitor the amount and timing of those obligations.

Please see Item 15(a)(1) of this Annual Report on Form 10-K for our Consolidated Financial Statements and supplementary data.

Not applicable.

Under the supervision and with the ~~SEC.~~participation of our management, including our Interim Chief Executive Officer, or Interim CEO, and our Chief Financial Officer, or CFO, we conducted an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this Annual Report on Form 10-K. Based upon that evaluation, our Interim CEO and our CFO have concluded that the design and operation of our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in SEC, ~~regulations also require these persons~~rules and forms and (ii) is accumulated and communicated to ~~furnish us~~our management, including our Interim CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three-month period ended December 31, 2012, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with ~~a copy~~generally accepted accounting principles.

Management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Eagle Well Services, Inc. and Sun Well Service, Inc., which were acquired on February 9, 2012 and May 31, 2012, respectively, and which are included in our consolidated balance sheet of December 31, 2012, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for the year then ended. On May 31, 2012, the business of Eagle Well Services, Inc. was merged with Sun Well Services, Inc. and both businesses operated as Sun Well Service, Inc. (Sun Well). Sun Well constituted 34% and 31% of total assets and net assets, respectively, as of December 31, 2012, and 70% of net revenues for the year then ended. Management did not assess the effectiveness of internal control over financial reporting of Sun Well because of the ~~copies~~timing of the forms furnished to us and written representations from our officers who are required to file Section 16(a) forms and our directors, we believe that all Section 16(a) filing requirements were met during fiscal 2010.

3

~~Audit Committee~~

~~The current members~~acquisitions, merger of the ~~Audit Committee are John Mutch (Chair), Jon S. Castor~~two acquired entities and ~~Lawrence J. Ruisi. Each~~subsequent integration efforts.

The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by BDO USA, LLP, an independent registered public accounting firm, as stated in their report which appears in Item 15(a) of this Annual Report on Form 10-K.

A control system, no matter how well conceived and operated, can only provide reasonable assurance that the objectives of the ~~members~~control system are met. Because of these inherent limitations, no evaluation of our ~~Audit Committee~~disclosure controls and procedures or our internal control over financial reporting will provide absolute assurance that misstatements due to error or fraud will not occur.

Not applicable.

Information with respect to directors, executive officers and corporate governance required by this Item is ~~“independent” as defined~~incorporated in this Annual Report on Form 10-K by reference to our Proxy Statement, to be filed with the ~~rules~~SEC within 120 days after the end of the ~~NASDAQ and meet~~fiscal year covered by this Annual Report, for our Annual Meeting of Stockholders to be held in 2013.

Information with respect to security ownership of certain beneficial owners and management and related stockholder matters required by this Item is incorporated in this Annual Report on Form 10-K by reference to our Audit Committee during our fiscal 2010.Our Board of Directors has determined that Mr. Ruisi qualifies as an “audit committee financial expert,” as defined under Item 407(d)(5) of Regulation S-K and meetsProxy Statement, to be filed with the NASDAQ financial sophistication requirement of having past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results inSEC within 120 days after the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities given his experience in public accounting and his professional experience as a controller and chief financial officer. Stockholders should understand that this designation is a disclosure requirementend of the ~~SEC related~~fiscal year covered by this Annual Report, for our Annual Meeting of Stockholders to ~~Mr. Ruisi’s experience~~be held in 2013.

Information with respect to certain relationships and related transactions and director independence required by this Item is incorporated in this Annual Report on Form 10-K by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our Annual Meeting of Stockholders to be held in 2013.

Information with respect to principal accounting fees and ~~auditing matters.~~ services required by this Item is incorporated in this Annual Report on Form 10-K by reference to our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year covered by this Annual Report, for our Annual Meeting of Stockholders to be held in 2013.

To the Board of Directors and ~~his designation~~Stockholders of Steel Excel Inc.

In our opinion, the consolidated statements of operations, of comprehensive loss, of stockholders’ equity and of cash flows listed in the index appearing under Item 15(a)1, present fairly, in all material respects, the results of operations and cash flows of Steel Excel Inc. (formerly ADPT Corporation) and its subsidiaries for the nine month period ended December 31, 2010, before the effects of the adjustments to retrospectively reflect the discounted operations and the reverse/forward stock split described in Note 1, in conformity with accounting principles generally accepted in the United States of America (the 2010 financial statements before the effects of the adjustments described in Note 1 are not presented herein). In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15 (a)2 presents fairly, in all material respects, the information set forth therein for the nine month period ended December 31, 2010 when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit. We conducted our audit, before the effects of the adjustments described above, of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards required that we plan to perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts of disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

We were not engaged to audit, review, or apply any procedures to the adjustments to retrospectively reflect the discontinued operations and the reverse/forward stock split described in Note 1 and accordingly, we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied. Those adjustments were audited by other auditors.

/s/ PricewaterhouseCoopers LLP

San Jose, California

March 3, 2011

Steel Excel Inc. (“Steel Excel” or the “Company”) currently operates in two reporting segments: Steel Sports and Steel Energy, while continuing to identify additional new business acquisition opportunities. For details regarding the Company’s historical business, which has been accounted for as discontinued operations, refer to Note 5 of the Notes to Financial Statements. The Company was previously known as ADPT Corporation.

On December 7, 2010, the Company’s Board of Directors approved the change in its fiscal year-end from March 31 to December 31. As a result of this change, the transition fiscal year was a nine-month transition period from April 1, 2010 to December 31, 2010 (the “Transition Period”). References in these Notes to Consolidated Financial Statements (the “Notes”) to “fiscal year 2012” or “fiscal 2012” refer to the calendar year of January 1, 2012 to December 31, 2012. References in these Notes to “fiscal year 2011” or “fiscal 2011” refer to the calendar year of January 1, 2011 to December 31, 2011.

During fiscal year 2012, the Company acquired one sports-related business, South Bay Strength and Conditioning LLC, and two oilfield servicing businesses, Sun Well Service Inc. and Eagle Well Services. During fiscal year 2011, the Company acquired two sports-related businesses, Baseball Heaven and The Show LLC, and one oilfield servicing business, Rogue Pressure Services LLC. See Note 3 for additional details. The Company operates in two reportable segments: Steel Sports and Steel Energy. See Note 16 for additional details.

In accordance with GAAP, management utilizes certain estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. By their nature, estimates are subject to an ~~audit committee~~inherent degree of uncertainty. Actual results could differ from those estimates.

Certain reclassifications have been made to prior years’ amounts to conform to the current year’s presentation. In July 2012, the Company reclassified The Show (acquired in August 2011) to discontinued operations as it was not meeting projections, with no expectation to perform as represented when acquired. In July 2011, the Company ceased its efforts to sell or license its intellectual property from its former enterprise-class external storage products business (the “Aristos Business”) and finalized the wind down of such business. As such, The Show and the Aristos Business are reflected as a discontinued operations in the accompanying financial ~~expert pursuant~~statements and prior periods have been reclassified to conform to this ~~SEC requirement does not affect~~presentation.

At the ~~duties, obligations or liabilities~~close of ~~any other member of our Audit Committee or~~business on October 3, 2011, the Company effected a reverse split (the “Reverse Split”) immediately followed by a forward split (the “Forward Split” and together with the Reverse Split, the “Reverse/Forward Split”). At the Company’s 2011 annual stockholders meeting, its stockholders approved a proposal authorizing the Board of ~~Directors.~~

Directors (the “Board”) to effect the reverse/forward stock split at exchange ratios determined by the Board within certain specified ranges.

The ~~Audit Committee assists~~exchange ratio for the ~~full Board~~Reverse Split was 1-for-500 and the exchange ratio for the Forward Split was 50-for-1. As a result of ~~Directors~~the Reverse Split, stockholders holding less than 500 shares (the “Cashed Out Stockholders”) were entitled to a cash payment for all of their shares. All remaining stockholders following the Forward Split (the “Remaining Stockholders”) were also entitled to a cash payment for any fractional shares that they would otherwise have received. The cash payment that each Cashed Out Stockholder or Remaining Stockholder was entitled to receive was based upon such stockholder’s pro rata share of the total net proceeds received in the sale of the aggregated fractional shares by the Company’s transfer agent at prevailing prices on the open market.

As a result of the Reverse/Forward Split, the Company’s common stock outstanding went from 108,868,286 shares at September 30, 2011 to 10,886,829 shares at October 3, 2011. All shares outstanding and per share information for the current and previous financial periods being reported have been adjusted to reflect the Reverse/Forward Split.

The Company measures fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value hierarchy prioritizes observable and unobservable inputs used to measure fair value into three broad levels, as described below:

See Notes 6 and 8.

The Company’s marketable securities are classified as available-for-sale and are reported at fair market value, inclusive of unrealized gains and losses, as of the respective balance sheet date. Marketable securities consist of corporate obligations, United States government securities, and government agencies. The Consolidated Balance Sheet is updated at each reporting period to reflect the change in the fair value of its marketable securities that have declined below or risen above their original cost. The Consolidated Statements of Operations reflect a charge in the period in which a determination is made that the decline in fair value is considered to be other-than-temporary. The Company does not hold its securities for trading or speculative purposes.

The Company recognizes an impairment charge for available-for-sale investments when a decline in the fair value of its investments below the cost basis is determined to be other than temporary. The Company considers various factors in determining whether to recognize an impairment charge, including the length of time the investment has been in a loss position, the extent to which the fair value has been less than the Company's cost basis, the investment's financial condition, and near-term prospects of the investee. If the Company determines that the decline in an investment's fair value is other than temporary, the difference is recognized as an impairment loss in its ~~general oversight~~Consolidated Statements of Operations.

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash, cash equivalents, marketable securities and trade accounts receivable. Deposits held with banks, including those held in foreign branches of global banks, may exceed the amount of insurance provided on such deposits. These deposits may be redeemed upon demand and, therefore, bear minimal risk. The Company, by policy, limits the amount of credit exposure through diversification, and management regularly monitors the composition of its investment portfolio for compliance with the Company’s investment policies.

For foreign subsidiaries whose functional currency is the local currency, the Company translates assets and liabilities to United States Dollars using period-end exchange rates, and translates revenues and expenses using average monthly exchange rates. The resulting cumulative translation adjustments are included in “Accumulated other comprehensive income, net of taxes,” as a separate component of stockholders’ equity in the Consolidated Balance Sheets.

For foreign subsidiaries whose functional currency is the United States Dollar, certain assets and liabilities are remeasured at the period-end or historical rates are used as appropriate. Revenues and expenses are remeasured at the average monthly exchange rates. Currency transaction gains and losses are recognized in current operations and have not been material to the Company’s operating results for the periods presented.

The allowance for doubtful accounts is based on the Company's assessment of the collectability of customer accounts. The Company regularly reviews its receivables that remain outstanding past their applicable payment terms and establishes an allowance by considering factors such as historical experience, credit quality, age of the accounts receivable balances, and current economic conditions that may affect a customer's ability to pay. There were no allowances for doubtful accounts as of December 31, 2012 and 2011.

Property and equipment are recorded at cost and depreciated using the straight-line method with the following useful lives:

Assets in progress are related to the construction of rigs and a building that have not yet been placed in service for their intended use. Depreciation for rigs commences once it is placed in service and depreciation for buildings commences once they are ready for their intended use.

Repairs and maintenance of property and equipment are expensed as incurred.

Long-lived assets primarily relate to the Company’s intangible assets and property and equipment. Intangible assets are amortized on a straight-line and an accelerated basis over their estimated useful lives, which range from five to ten years. Property and equipment is stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, which range from five to 25 years.

The Company regularly performs reviews to determine if facts or circumstances are present, either internal or external, which would indicate that the carrying values of its long-lived assets may not be recoverable. Indicators include, but are not limited to, a significant decline in the market price of a long-lived asset, an expectation that more likely than not, a long-lived asset will be sold or otherwise disposed of significantly before the end of its previously estimated useful life or a current period operating or cash flow loss combined with a historical or projected operating or cash flow loss.

The recoverability of the carrying value of the long-lived assets, other than goodwill, is based on the estimated future undiscounted cash flows derived from the use of the asset. If a long-lived asset is determined to be impaired, the loss is measured based on the difference between the long-lived asset’s fair value and its carrying value. The estimate of fair value of long-lived assets is based on a discounted estimated future cash flows method and application of a discount rate commensurate with the risks inherent in the current business model. The Company’s current business model contains management’s subjective estimates and judgments; however, actual results may be materially different than the assumptions made by management.

Based on the Company’s decision to pursue the sale or disposition of assets and/or business operations, it evaluated its long-lived assets and recorded impairment charges in the Transition Period aggregating $10.2 million. Of this $10.2 million, $6.1 million related to the write-off of intangible assets and $4.1 million related to the reduction of the carrying value of property and equipment, net, to our estimated fair value. There were no impairment charges on long-lived assets recorded in fiscal 2012 and 2011.

Goodwill represents the excess of cost over the value of net assets of businesses acquired and is carried at cost unless write-downs for impairment are required. The Company’s goodwill as of December 31, 2012 is a result of its acquisitions in fiscal 2012 and 2011. The Company operates under three reporting units, Sun Well, Rogue and Sports, and accordingly, its goodwill has been recorded in these respective reporting units. The Company evaluates the carrying value of goodwill at its reporting unit on an annual basis during the fourth quarter and whenever events and changes in circumstances indicate that the carrying amount may not be recoverable. Such indicators would include a significant reduction in its market capitalization, a decrease in operating results or deterioration of its financial position. In the fourth quarter of fiscal 2012 and 2011, the Company tested the goodwill acquired. In fiscal 2012, it determined the goodwill from Baseball Heaven (the Sports reporting unit) was fully impaired and wrote off the $0.2 million. There was no impairment of the Sun Well and Rogue reporting units. The impairment analysis required a two-step approach and entailed certain assumptions and estimates of discounted cash flows and a residual terminal value categorized as Level 3 inputs under the fair value hierarchy. The Company used a discount rate of approximately 16% and assumed a multiple of EBITDA ranging from 4.6 to 6.0. There was no impairment indicated in fiscal 2011.

Intangible assets, net, for the Steel Sports segment, consist of acquisition-related customer relationships that are amortized over their estimated life of five years on a straight-line basis. Intangible assets, net, for the Steel Energy segment, consist of acquisition-related customer relationships and trade names. The customer relationships and trade names are amortized over the useful life of ten and five years, respectively, utilizing the accelerated amortization method that approximates the estimated future cash flows from the intangibles. Also, see Note 3 to the Consolidated Financial Statements. The Company evaluates other intangible assets for impairment whenever events and circumstances indicate that such assets might be impaired.

The Company is responsible in many cases for any environmental liabilities resulting from its oilfield services work. It does not anticipate significant environmental liabilities for work completed through December 31, 2012, so no reserve for environmental liabilities has been recorded.

The Company recognizes revenue upon providing the product or service. It provides services and products through two segments: Steel Sports and Steel Energy. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collection is reasonably assured. Revenue is recognized net of estimated allowances. Revenue is generated by short-term projects, most of which are governed by master service agreements (“MSAs”) that are short-term in nature. The MSAs establish per day or per usage rates for equipment services. Steel Energy revenue is recognized daily on a proportionate performance method, based on services rendered. Revenue is reported net of sales tax collected. For Steel Sports revenues, the Company does not recognize revenue until the tournament or league occurs. For sports products, revenue is recognized upon shipment.

Revenue recognition for the Company’s discontinued operations was as follows:

The application of the appropriate accounting principle to the Company’s revenue was dependent upon specific transactions or combination of transactions. As described below, significant management judgments and estimates were made and used in connection with the revenue recognized in any accounting period. Material differences may have resulted in the amount and timing of revenue for any period if management had made different judgments or utilized different estimates.

The Company recognized revenue from its product sales, including sales to original equipment manufacturers, when persuasive evidence of an arrangement existed, delivery had occurred or services had been rendered, the price was fixed or determinable and collectibility was reasonably assured. These criteria were usually met upon shipment from the Company, provided that the risk of loss had transferred to the customer, customer acceptance was obtained or acceptance provisions had lapsed, or the Company had established a historical pattern that acceptance by the customer was fulfilled. The Company’s sales were based on customer purchase orders, and to a lesser extent, contractual agreements, which provided evidence that an arrangement existed.

The Company’s distributor arrangements provided distributors with certain product rotation rights. Additionally, the Company permitted distributors to return products subject to certain conditions. The Company established allowances for expected product returns. The Company also established allowances for rebate payments under certain marketing programs entered into with distributors. These allowances comprised the Company’s revenue reserves and were recorded as direct reductions of revenue and accounts receivable. The Company made estimates of future returns and rebates based primarily on its past experience as well as the volume of products in the distributor channel, trends in distributor inventory, economic trends that might impact customer demand for its products (including the competitive environment), the economic value of the rebates being offered and other factors. In the past, actual returns and rebates were not significantly different from the Company’s estimates.

For products that contained software, where software was essential to the functionality of the product, or software product sales, the Company recognized revenue when passage of title and risk of ownership was transferred to customers, persuasive evidence of an arrangement existed, which was typically upon sale of product by the customer, the price was fixed or determinable and collectibility was probable. For software sales that were considered multiple element transactions, the entire fee from the arrangement was allocated to each respective element based on its vendor specific fair value or upon the residual method and recognized when revenue recognition criteria for each element was met. Vendor specific fair value for each element was established based on the sales price charged when the same element was sold separately or based upon a renewal rate.

The Company accounts for income taxes for uncertain tax positions using a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in our financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. In addition, the Company continued to recognize interest and/or penalties related to uncertain tax positions as income tax expense in its Consolidated Statements of Operations.

The Company must make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets, tax credits, benefits, deductions and liabilities, which arise from differences in the timing of recognition of revenue and expense for tax and financial statement purposes, as well as the interest and penalties related to those uncertain tax positions. Significant changes to these estimates may result in an increase or decrease to its tax provision in subsequent periods. Due to the complexity and uncertainty associated with the Company’s tax contingencies, the Company cannot make a reasonably reliable estimate of the period in which the cash settlement will be made for the Company’s liabilities associated with uncertain tax positions.

In addition, the calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The Company recognizes liabilities for anticipated tax audit issues in the United States and other tax jurisdictions based on its estimate of whether, and the extent to which, additional taxes and related interest will be due. If it ultimately determines that payment of these amounts is unnecessary, the Company reverses the liability and recognizes a tax benefit during the period in which it determines that the liability is no longer necessary. The Company records an additional charge in its provision for taxes in the period in which it determines that the recorded tax liability is less than it expects the ultimate assessment to be.

In February 2013, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No. 2013-02, Topic 350 - Comprehensive Income ("ASU 2013-02"), which amends Topic 220 to improve the reporting ~~internal controls~~of reclassifications out of accumulated other comprehensive income to the respective line items in net income. ASU 2013-02 is effective for reporting periods beginning after December 15, 2012. The Company is evaluating the impact of this ASU and ~~audit functions,~~does not expect the adoption will have a material impact on its consolidated results of operations or financial condition.

In July 2012, the FASB issued ASU No. 2012-02, Topic 350 - Intangibles - Goodwill and Other ("ASU 2012-02"), which amends Topic 350 to allow an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of an indefinite-lived intangible asset is less than its carrying value. An entity would not be required to determine the fair value of the indefinite-lived intangible unless the entity determines, based on the qualitative assessment, that it is more likely than not that its fair value is less than the carrying value. ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012 and early adoption is permitted. The Company is evaluating the impact of this ASU and does not expect the adoption will have an impact on its consolidated results of operations or financial condition.

On June 27, 2011, the Company acquired all the net assets of Baseball Heaven LLC and Baseball Café, Inc. (collectively, “Baseball Heaven”), respectively, for an aggregate purchase price of $6.0 million in cash. Baseball Heaven is in the business of marketing and providing baseball facility services, including training camps, summer camps, leagues and tournaments, and concession and catering events. Baseball Heaven is included in the Steel Sports reporting segment.

The Company accounted for the Baseball Heaven acquisition as a business combination and the total consideration of $6.0 million has been allocated to the net assets and liabilities acquired based on their respective estimated fair values at June 27, 2011 as follows:

The intangible assets acquired, consisting of customer relationships, are being amortized on a straight-line basis with a life of five years. The amortization expense of $20,000 is included in “Selling, marketing, and administrative expenses” in the Consolidated Statements of Operations for fiscal year 2011. The goodwill of $0.2 million arose from the growth potential the Company saw for Baseball Heaven and was expected to be deductible for tax purposes. As of December 31, 2012, the Company found this goodwill to be impaired. The $0.2 million goodwill impairment charge is included in the Consolidated Statements of Operations for fiscal 2012. The acquisition-related costs for the purchase of Baseball Heaven, included in “Selling, marketing, and administrative” expenses in the Consolidated Statements of Operations, were $0.2 million for fiscal year 2011.

On August 15, 2011, the Company acquired all of the net assets used by The Show, LLC (“The Show”), which it contributed to The Show in exchange for a 75% membership interest. The Company paid an aggregate purchase price of $1.5 million in cash for these assets. The Show was engaged in the business of outfitting little league baseball and softball players and coaches in fully licensed Major League Baseball, minor league, and college replica uniforms, and sponsoring, hosting, operating, and managing baseball and softball leagues, tournaments, and other events and related websites. The Show was included in the Steel Sports reporting segment.

The Company accounted for The Show acquisition as a business combination and the total consideration of $1.5 million was allocated to the net assets acquired (no liabilities were assumed in connection with this transaction) based on their respective estimated fair values at August 15, 2011 as follows:

The goodwill of $1.8 million arose from the Company’s expectations for the potential of The Show to expand and was expected to be deductible for tax purposes. In July 2012, the Company reclassified The Show to discontinued operations as it was not meeting projections, with no expectation to perform as represented when acquired. As such, this goodwill was written off. See Note 5 for additional details. The acquisition-related costs for the purchase of The Show, included in “Selling, marketing, and administrative” expenses in the Consolidated Statements of Operations, were $0.1 million for fiscal year 2011.

On December 7, 2011, the Company acquired all of the net assets of Rogue Pressure Services, LLC (“Rogue”) for an aggregate purchase price of $30.2 million, which includes cash of $29.0 million and a contingent consideration liability of $1.2 million pursuant to an earn-out clause based on the achievement of certain performance levels. Rogue provides snubbing services (controlled installation and removal of all tubulars - drill strings and production strings) in and out of the wellbore with the well under full pressure, flowtesting, and hydraulic work over/simultaneous operations (allows customers to perform multiple tasks on multiple wells on one pad at the same time). Rogue is included in the Steel Energy reporting segment.

The Company accounted for the Rogue acquisition as a business combination and the total cash consideration of $29.0 million was allocated to the net assets acquired and liabilities assumed based on their respective estimated fair values at December 7, 2011 as follows:

The intangible assets acquired consist of customer relationships and a trade name, which are being amortized on an accelerated basis over their useful lives, which range from five to ten years. The amortization expense of $29, 000 is included in “Cost of revenues” in the Consolidated Statements of Operations for fiscal year 2011. The goodwill of $6.3 million arises from the growth potential the Company sees for Rogue and is ~~directly responsible~~expected to be deductible for tax purposes. The acquisition-related costs for the ~~appointment, compensation~~purchase of Rogue included in “Selling, marketing, and ~~retention~~administrative” expenses in the Consolidated Statements of ~~our independent registered public accounting firm, which reports~~Operations, were $0.2 million for fiscal 2011. The contingent consideration liability is included in “Accrued expenses and other liabilities” in the Consolidated Balance Sheet. As Rogue did not meet the requirements for payment of the contingent consideration liability for fiscal 2012, the Company recorded an adjustment to the ~~Audit Committee. In addition, any related-person transactions, excluding compensation (whether~~liability of $0.7 million, which is included as a reduction of “Selling, general and administrative” expenses in the Consolidated Statements of Operations for fiscal 2012.

The intangible assets acquired consist of customer relationships, which are being amortized on an accelerated basis over the estimated useful life of ten years. The $10.1 million goodwill arises from the growth potential the Company sees for the Well Services business, along with expected synergies with the Company’s current Steel Energy businesses, and is expected to be deductible for tax purposes. The acquisition-related costs for the purchase of Well Services included in “Selling, general and administrative” expenses in the Consolidated Statement of Operations were $0.2 million for fiscal 2012.

On May 31, 2012, the Company completed its acquisition of SWH, Inc. (“SWH”), a subsidiary of BNS Holding, Inc. (“BNS”). SWH’s sole business is Sun Well Service, Inc. (“Sun Well”), which is ~~delegated~~a provider of premium well services to oil and gas exploration and production companies operating in the Williston Basin in North Dakota and Montana.

Pursuant to the ~~Compensation Committee, involving one of our directors or executive officers, must be reviewed and approved by the Audit Committee or another independent body~~terms of the ~~Board~~Share Purchase Agreement, the Company acquired all of ~~Directors.~~

~~Code~~the capital stock of ~~Conduct~~

~~We maintain~~SWH for an acquisition price aggregating $68.7 million. The aggregate acquisition price consisted of the issuance of 2,027,500 shares of the Company’s common stock (valued at $30 per share) and cash of $7.9 million. Affiliates of Steel Partners Holdings L.P. (“Steel Partners”) owned approximately 40% of the Company’s outstanding common stock and 85% of BNS prior to the execution of the Share Purchase Agreement.

As a ~~Code~~result of ~~Business Conduct, Ethics,~~the acquisition and ~~Compliance,~~additional shares acquired on the open market, Steel Partners beneficially owned approximately 51.1% of the Company’s outstanding common stock. Both BNS and the Company appointed a special committee of independent directors to consider and negotiate the transaction because of the ownership interest held by Steel Partners in each company. Please see Note 18 for further details of this related party transaction.

The Company accounted for this acquisition as a business combination and the total acquisition price has been allocated to the net assets acquired based on their respective estimated fair values at May 31, 2012 as follows:

Additionally, on May 31, 2012, the business of Well Services was combined with Sun Well and both businesses now operate as Sun Well, which is included in the Steel Energy reporting segment.

The $0.1 million of goodwill arises from the growth potential the Company sees for CrossFit South Bay, and is expected to be deductible for tax purposes. The acquisition-related costs for the acquisition of CrossFit South Bay included in “Selling, general and administrative” expenses in the Consolidated Statement of Operations aggregated $4,252 for fiscal 2012.

The results of operations of the acquisitions have been included in the accompanying financial statements since their respective acquisition dates. Since all previous operations of the Company prior to June 2011 have been discontinued, the revenues and cost of revenues of the acquired businesses represent the entire revenues and cost of revenues of the Company for the periods presented.

The Company is not including pro forma information for the operations of Baseball Heaven, The Show and CrossFit South Bay for the periods prior to their acquisition because they were not material to the Company’s results of operations and earnings per share. The following pro forma financial information presents the combined results of the Company, Sun Well (including Eagle merged as Well Services) and Rogue, as if the acquisitions had occurred at the beginning of the fiscal year ended December 31, 2011. Such pro forma results are not necessarily indicative of what would have actually occurred had the acquisitions been in effect for the entire periods. The pro forma financial results are as follows:

The Company grants stock options and other stock-based awards to employees, directors and consultants under two equity incentive plans, the 2004 Equity Incentive Plan, as amended and restated on August 20, 2008 and as further amended thereafter (the “2004 Equity Incentive Plan”) and the 2006 Director Plan, as amended. As disclosed in Note 1, all share information has been adjusted to reflect the Reverse/Forward Split.

As of December 31, 2012, the Company had an aggregate of 1.8 million shares of its common stock reserved for issuance under its 2004 Equity Incentive Plan, of which 0.1 shares were subject to outstanding options and other stock-based awards and 1.7 million shares were available for future grants of options and other stock-based awards. As of December 31, 2012, the Company had an aggregate of 0.5 million shares of its common stock reserved for issuance under its 2006 Director Plan, of which 0.1 million shares were subject to outstanding options and other stock-based awards and 0.4 million shares were available for future grants of options and other stock-based awards.

Stock Options: A summary of stock option activity under all of the Company’s equity incentive plans as of December 31, 2012 and for fiscal years ended December 31, 2012 and 2011, and for the Transition Period is as follows:

There is no aggregate intrinsic value of options at December 31, 2012 and 2011 as there were no options “in-the-money.” During fiscal year 2011 and the Transition Period, the aggregate intrinsic value of options exercised under the Company’s equity incentive plans was minimal. The following table summarizes the Company’s options outstanding and exercisable at December 31, 2012:

As of December 31, 2012, the total unamortized stock-based compensation expense related to non-vested stock options, net of estimated forfeitures, was approximately $0.1 million and this expense is expected to be recognized over a remaining weighted-average period of 1.7 years.

Restricted Stock: Restricted stock awards and restricted stock units (collectively, “restricted stock”) were granted under the Company’s 2004 Equity Incentive Plan and 2006 Director Plan. As of December 31, 2012, there were 86,041 shares of service-based restricted stock awards and 16,875 shares of restricted stock units outstanding. The cost of restricted stock, determined to be the fair market value of the shares at the date of grant, is expensed ratably over the period the restrictions lapse. Certain non-employee directors received restricted stock shares that will vest immediately if the relationship between the Company and the non-employee director ceases for any reason. These non-vested shares are recognized and fully expensed as stock-based compensation expense at the date of grant.

A summary of activity for restricted stock as of December 31, 2012 and changes during fiscal years 2012 and 2011, and the Transition Period is as follows:

The Company measures and recognizes stock-based compensation for all stock-based awards made to its employees ~~including all officers,~~ and ~~our independent~~ directors ~~with regard to their ADPT-related activities. The Code~~based on estimated fair values using a straight-line amortization method over the respective requisite service period of ~~Business Conduct, Ethics,~~the awards and Compliance incorporates our guidelines designed to deter wrongdoing and to promote honest and ethical conduct and compliance with applicable laws and regulations. It also incorporates our expectations of our employees that enable us to provide accurate and timely disclosure in our filings with the SEC and other public communications.adjusts it for estimated forfeitures. In addition, ~~it incorporates our guidelines pertaining~~the Company applies the simplified method to ~~topics such as health and safety compliance; diversity and non-discrimination; supplier expectations; and privacy. The full text~~establish the beginning balance of the ~~Code of Business Conduct, Ethics, and Compliance is published on our website under Corporate Governance at http://investor.adptco.com. We will post any amendments~~additional paid-in capital pool related to the ~~Code~~tax effects of ~~Business Conduct, Ethics, and Compliance, as well as any waivers that are required~~employee stock-based compensation, which is available to ~~be disclosed by the rules of either the SEC or The NASDAQ Stock Market, on our website.~~

~~Stockholder Nominations of Directors~~

~~There have been no changes to the procedures by which our security holders may recommend nominees to our Board of Directors since the filing of our Definitive Proxy Statement on March 17,~~absorb tax shortfalls.

In May 2010, ~~for our fiscal 2009 annual meeting of stockholders, which was held on March 31, 2010.~~

~~Item 11.~~~~Executive Compensation~~

~~Compensation Discussion and Analysis~~

This Compensation Discussion and Analysis section discusses our executive compensation philosophy, decisions and practices for fiscal 2010, and places in perspective the earnings of our “named executive officers” during our fiscal 2010. As set forth in the Summary Compensation Table below, our named executive officers for fiscal 2010 were John J. Quicke, our Interim President and CEO, Subramanian “Sundi” Sundaresh, our former President and CEO, Mary L. Dotz, our Vice President and CFO, Marcus D. Lowe, our former Vice President of

Marketing and Business Development, and John Noellert, our former Vice President of World Wide Sales. Mr. Sundaresh’s employment with us was terminated effective January 4, 2010. Effective January 5, 2010, Mr. Sundaresh became a consultant for us. Mr. Quicke was appointed to serve as our Interim President and CEO effective January 4, 2010. Messrs. Noellert’s and Lowe’s employment with us was terminated effective November 20, 2009 and March 5, 2010, respectively.

~~Compensation Philosophy and Overview~~

We believe that the most effective compensation program is one that is designed to reward the achievement of our financial and strategic goals, and which aligns executives’ interests with those of our stockholders.

The compensation programs for our named executive officers have three principal elements which are developed in part by referencing the 50th percentile of our comparable market: a base salary, cash incentive bonuses linked to achievement of financial and corporate goals, and equity-based incentive compensation. The base salary is designed to serve as a fixed portion of compensation; the cash incentive bonus serves as an incentive for our executives to drive short-term corporate financial and non-financial goals without excessive risk-taking; and the equity-based incentive compensation is designed to drive our longer-term performance, retain executives through longer-term vesting and align the interests of our executive officers with the interests of our stockholders by providing a performance-based ownership stake in us. In addition, we provide our executive officers benefits that in most cases are available generally to all of our salaried employees. As further discussed below, we largely view these primary components of our compensation as distinct in that we seek to provide salary, bonus and equity awards that are each competitive at appropriate levels with our peer companies.

~~The compensation philosophy of~~ the Compensation Committee of the Board of Directors (the “Committee”) is to keep cash compensation at a competitive level while providing the opportunity to be significantly rewarded through equity if ADPT and our stock price perform well over time. We believe that our executive officers should have a larger portion of their equity incentive awards at risk compared with our other employees. Specifically, we believe that over the long term, executive officers should have a greater percentage of their equity compensation in the form of stock options and performance-contingent stock rather than time-based restricted stock, as the economic value of stock options and performance-contingent stock is more aligned with the objectives of our stockholders.

~~Fiscal 2010.~~ In addition to the factors that the Committee normally considers in formulating our compensation program in fiscal 2010, the Committee also took account of several specific factors that impacted our business: (1) a change in the composition of the Board of Directors (“Board”) effective November 6, 2009, as a result of which fewer than a majority of our Directors were previously Incumbent Directors, as defined in certain of our compensation plans and agreements; (2) a change in executive leadership effective January 4, 2010 with the termination of Mr. Sundaresh, our former CEO, and the appointment of John J. Quicke as Interim President and CEO, effective January 5, 2010; (3) aggressive cost cutting initiatives; and (4) a planned transaction to sell certain of our operations and assets (“Sale of Operations”). As used in this Annual Report on Form 10-K/A for the year ended March 31, 2010, the term “Sale of Operations” means a sale of substantiallymodified all ~~of operating assets of the Company, excluding cash, real property and intellectual property not sold in the transaction.~~

Because of these circumstances, the Committee did not make significant changes to base salaries, except for our CFO. The Committee kept base salaries generally at the prior year’s level due to the Committee’s desire to contain costs and the Committee’s belief that an overall increase in base pay was not required to keep the Company reasonably competitive with the base pay of our peers. Additionally, the Committee reverted back to an annual measurement as opposed to two six-month bonus periods when evaluating the financial goal attainment for cash bonus incentives, as our prior fiscal year had two distinct events which included the divestiture of the Snap Server NAS business which occurred in the first half of fiscal 2009 and our acquisition of Aristos Logic in the second half of fiscal 2009. The Committee continued to measure non-financial goal attainment in two six-month bonus periods (instead of an annual measurement), which is consistent with our prior fiscal year. The financial measurement goal for fiscal 2010 was based upon meeting a specified level of pro-forma operating

5

profit (loss) before income taxes (“OPBT”). The OPBT differs from generally accepted accounting principles (“GAAP”) operating profit (loss) in that OPBT primarily excludes stock-based compensation expense, expense associated with our management liquidation pool, restructuring charges and impairment charges of long-lived assets.

Equity compensation granted to executive officers included two elements: stock options and performance-contingent stock. The stock options and performance-contingent stock shows our intent to increasingly utilize equity awards where the ultimate value of the award is more closely linked to our performance and growth in stockholder value.

~~Role of the Compensation Committee~~

The current members of the Committee are Jon S. Castor, who is the Chair of the Committee, Jack L. Howard and John Mutch. Robert J. Loarie served on the Committee during fiscal 2010 until he ceased serving on our Board effective October 30, 2009. He was replaced by Mr. Howard in November 2009. During fiscal 2010, Mr. Quicke also served as a member of the Compensation Committee. He was replaced by Mr. Mutch in December 2009. Mr. Castor served on the Committee for all of fiscal 2010.

The Committee ensures that our executive compensation and benefits program is consistent with our compensation philosophy and our corporate governance guidelines and is empowered to determine executive officers’ total compensation, and, subject to the approval of the Board, to determine our CEO’s total compensation.

The Committee reviews our overall compensation strategy at least annually to ensure that it promotes stockholder interests, supports our strategic and tactical objectives and provides for appropriate rewards and incentives for our executive officers.

In fiscal 2010, all Committee members attended all Committee meetings, except for one meeting. Typically, Committee meetings are also attended by our CEO, CFO and our Vice President of Human Resources, for all appropriate portions of such meetings.

~~Review of Executive Officers and their Compensation~~

The Committee and our Board are responsible for the review of our CEO’s performance. In the beginning of fiscal 2010, the Chairman of the Committee led a formal review that included a self-evaluation by the CEO and input from each member of the Board. The results were shared with the CEO, members of the Committee and all members of the Board.

~~Our CEO annually reviews the performance of each of our other executive officers. As part of this process, each executive officer also completes a self assessment of his/her performance.~~

~~Our CEO rates the performance of his direct staff and the Committee rates the performance of our CEO in consultation with the other non-executive directors of the Board.~~

Our CEO’s recommendations based on his reviews of executives reporting to him, peer compensation surveys and other relevant information, including with respect to continued employment, salary adjustments, incentive awards and equity award amounts, are presented to the Committee. The Committee thoughtfully considers the CEO’s recommendations when exercising its own judgment in making compensation decisions and awards to our executive officers who report to the CEO.

~~Survey Analysis~~

In fiscal 2010, we engaged Radford Surveys + Consulting, a business unit of AON Consulting (“Radford”), to provide comprehensive compensation data. Radford conducts a number of compensation surveys for the technology industry. The surveys compare compensation practices for executives among other high technology companies and cover base salary, cash incentives, stock equity incentive grants and total cash as a percentage of total direct compensation.

Radford provides quarterly summaries of industry trends to our Vice President of Human Resources, which enables Human Resources to remain current on total compensation trends for the broader population and for executive officers. This information is shared with the Committee. Our Vice President of Human Resources also reviews the Radford Total Company Results survey comprised of data for executives from approximately 125 technology companies with $50 million to $200 million in annual revenues. In addition to this information, which is shared with the Committee, the Committee also considers other reference points in reviewing compensation data. In particular, the Committee reviews the Radford Total Custom Company Results survey provided by Radford that compares executive compensation information for a peer group of high technology companies or their divisions, with $100 million to $500 million in annual revenues. The peer group is primarily in the storage, computer peripherals, and semiconductor components businesses with which we compete for executive and technical employees. The list of peer companies, their industry classification and revenue ranges is as follows:


~~Company Name~~	~~Industry~~	~~Revenue~~
~~3Par~~	~~Computer/Peripherals~~	~~$100 million - $199.9 million~~
~~Anadigics~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~Cirrus Logic~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~Cortina Systems~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~Data Domain~~	~~Network Products/Services~~	~~$100 million - $199.9 million~~
~~Mindspeed Technologies~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~Netlogic Microsystems~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~Pericom Semiconductor~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~Rambus~~	~~Semiconductor Components~~	~~$100 million - $199.9 million~~
~~AMCC~~	~~Semiconductor Components~~	~~$200 million - $499.9 million~~
~~Datalogic Scanning~~	~~Computer/Peripherals~~	~~$200 million - $499.9 million~~
~~Dot Hill Systems~~	~~Computer/Peripherals~~	~~$200 million - $499.9 million~~
~~Emulex~~	~~Computer/Peripherals~~	~~$200 million - $499.9 million~~
~~Extreme Networks~~	~~Network Products/Services~~	~~$200 million - $499.9 million~~
~~PMC-Sierra~~	~~Semiconductor Components~~	~~$200 million - $499.9 million~~
~~Riverbed Technology~~	~~Network Products/Services~~	~~$200 million - $499.9 million~~
~~Silicon Image~~	~~Semiconductor Components~~	~~$200 million - $499.9 million~~
~~Silicon Storage Technology~~	~~Semiconductor Components~~	~~$200 million - $499.9 million~~
~~Synaptics~~	~~Computer/Peripherals~~	~~$200 million - $499.9 million~~
~~Wind River Systems~~	~~Software Products/Services~~	~~$200 million - $499.9 million~~

~~External Advisors~~

The Committee has the authority to engage the services of outside advisors, and does so as needed. In fiscal 2010, the Committee selectively engaged the services of Compensia as an independent advisor to assist the Committee in its review of fiscal 2010 Board compensation and composition, and review of retention programs related to a change of control. In the projects that the Committee assigned to Compensia, there were no restrictions placed on the scope of Compensia’s review of our compensation arrangements with our executive officers and in its review of Board compensation. During fiscal 2010, the Committee selectively engaged the services of compensation legal specialists with Fenwick & West LLP, Cooley Godward Kronish LLP and Bryan Cave LLP for legal advice in connection with compensation related matters.

~~Accounting and Tax Implications of Our Compensation Policies~~

In designing our compensation programs, the Committee considers the financial accounting and tax consequences to us, as well as the tax consequences to employees. We account for equity compensation paid to our employees under the accounting guidance related to stock-based compensation, which requires us to estimate and record an expense over the service period of the award. The stock-based compensation cost of our equity awards is considered by management as part of our equity grant recommendations to the Committee.

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Section 162(m) of the Internal Revenue Code places a limit of $1 million on the amount of compensation that we may deduct for income tax purposes in any one year with respect to our CEO and certain other of our most highly compensated executive officers. This limitation does not apply to compensation that is considered “performance-based” under applicable tax rules. Our annual incentive plan, executive stock options and our performance-based restricted stock awards are intended to qualify as “performance-based,” so that compensation attributable to these forms of equity incentives is fully tax deductible. However, time-based restricted stock units (“RSUs”), awarded by us in prior years do not meet the requirements of Section 162(m) as performance-based. Therefore, the fair market value of the shares that vest during a particular year will be counted along with other non-performance-based compensation in that year in determining whether the $1 million limit for non-performance-based compensation is exceeded. Although we also provide cash compensation to executives in forms that do not meet the requirements for “performance-based” compensation, such as base salary and annual incentive pay, we have no individuals who received non-performance-based cash compensation in excess of the Section 162(m) tax deduction limit in fiscal 2010. In future years, payment of cash or settlement of restricted stock or RSU amounts may be non-deductible because they are not performance-based under Section 162(m). The Committee has determined that it is important to retain flexibility and competitiveness in its compensation program, and that while it is also important to be mindful of the $1 million limit, compensation in excess of the $1 million limit may not always qualify as “performance-based” within the meaning of Section 162(m).

~~Fiscal 2010 Executive Compensation Program~~

~~Components of our Compensation Program~~

~~Base Salary~~. Base salaries serve as the fixed cash portion of executive compensation. In fiscal 2010, we generally maintained the base salary for each of the persons who were named executive officers at the same level as the fiscal 2009 salaries. The Committee’s goal in fiscal 2010 was to benchmark salaries at or near the middle (50th percentile) of the market based on the survey information discussed above under “Survey Analysis,” input from Compensia, and the Committee determined that salary increases were not necessary to achieve this level of compensation. We believe the officers should be paid competitively and generally not above or below the market data unless their experience, capabilities, and/or responsibilities warrant either a higher or lower placement compared to market. The base salaries of our executive officers reflect their relative positions and responsibilities.

Mr. Quicke, our Interim President and CEO, receives a cash payment of $30,000 per month for his service in such capacity, which is in addition to his compensation as a non-executive member of our Board. Mr. Quicke does not participate in the benefit programs generally available to all salaried employees of the Company. Although Mr. Quicke has received a discretionary bonus upon recommendation of the Committee and approval of the Board, in recognition of his leadership in the successful Sale of the Company’s DPS Business to PMC Sierra (as described below in “Actions Taken After the Completion of Fiscal 2010”), Mr. Quicke is not eligible to participate in the AIP (as described below). In addition, Mr. Quicke received no Equity-Based Long Term Incentive Compensation for his role as Interim President and CEO, but does receive equity awards for his services as a Board member on the same basis as all non-executive Board members. The Board, upon the recommendation of the Committee, determined to compensate Mr. Quicke as described above based upon the fact that Mr. Quicke would be spending substantially all of his business time working in the capacity as the Interim President and CEO of the Company, but that such amount was below the amount that our former CEO was paid, as well as the 50^th percentile of the Radford surveys described above under the heading “Survey Analysis.” Additionally, in light of the fact that Mr. Quicke’s status as an officer of the Company was only on an interim basis, the Board, upon the recommendation of the Committee, determined to continue to grant Mr. Quicke compensation for his service on our Board on the same basis as all non-executive Board members, and not to award Mr. Quicke any other benefits (including those described in the preceding paragraph) that our executive officers have historically been provided.

In fiscal 2010, the Committee agreed, based on the recommendation by management, to temporarily reduce annual base salaries for our employees, including each of our named executive officers, by 10% from April 1, 2009 to December 31, 2009. The annual base salary of Mr. Sundaresh, our former CEO, was $450,000, and was

temporarily reduced to $405,000 from April 1, 2009 to December 31, 2009. Mr. Sundaresh’s annual base salary had not changed since April 1, 2006 primarily due to our determination to be consistent with lower revenue companies in the Radford Total Company Results ($100 million – $200 million Revenue) and the Radford Total Custom Company Results ($100 million – $500 million Revenue) surveys for CEO base salaries. The annual base salary of Ms. Dotz, our Vice President and CFO, was $265,000, and was temporarily reduced to $238,500 from April 1, 2009 to December 15, 2009. In fiscal 2010, effective December 16, 2009, Ms. Dotz annual base salary was increased to $325,000; however, she continued to receive the temporary annual base reduction of 10% of such amount, or $292,500 on an annualized basis, from December 16, 2009 to December 31, 2009. Ms. Dotz’s annual base salary was set at the 75^th ~~percentile of the Radford Total Custom Company Results instead of the 50~~^th percentile to reflect the additional responsibilities requested of her by the Board in relation to the Sale of Operations. Prior to the increase in her annual base salary that was effective December 16, 2009, the annual base salary of Ms. Dotz remained the same since she joined us on March 31, 2008. The annual base salary of Mr. Lowe, our former Vice President of Marketing, was $240,000, effective April 6, 2009, and was temporarily reduced to $216,000 from April 1, 2009 to December 31, 2009. His annual base salary was based on his title change, which was determined largely by benchmarking to peers at the 50th percentile of the Radford Total Custom Company Results. Prior to the reduction in his annual base salary that was effective April 6, 2009, Mr. Lowe served as the Vice President of Business Development and earned an annual base salary of $260,000. The target annual earnings of Mr. Noellert, our former Vice President of Worldwide Sales, who was a named executive officer for fiscal 2009, was $310,000, and was temporarily reduced to $279,000 from April 1, 2009 to November 20, 2009, his termination date. Mr. Noellert’s target annual earnings included both annual base salary of $217,000 and annual target incentives for revenue-related achievements of $93,000, which had not changed since August 20, 2007. Mr. Noellert’s target annual earnings were determined largely by benchmarking to peers at the 50th percentile of the Radford Total Custom Company Results. At the beginning of each fiscal year, the CEO and the Committee established the performance targets that served as the basis for awarding Mr. Noellert his incentive pay. In fiscal 2010, from April 1, 2010 to November 20, 2010, his termination date, Mr. Noellert earned commissions of $49,440, which represented 22.8% of his annual base salary. Prior to the increase in his annual target earnings on August 20, 2007, Mr. Noellert’s earned a target annual earnings was $291,500 in his prior role as Vice President of Sales for North America.

~~Executive Bonus Incentive Program~~. We maintained the ADPT Incentive Plan (the “AIP”) through fiscal 2010. The AIP is a cash incentive program for our employees, including those identified as our named executive officers. In fiscal 2010, the AIP consisted of two components: financial goals and non-financial corporate goals, each of which is approved by the Committee. The Committee placed greater emphasis on the financial goals as we sought to drive our performance primarily through specific objective financial metrics. As a result, 75% of the funding of the AIP incentive pool (the “AIP Pool”) was tied to financial goals and 25% of the funding of the AIP Pool was tied to non-financial corporate goals. The financial goals’ component was based upon us achieving a minimum threshold of OPBT for fiscal 2010, which was measured during the first fiscal quarter of the following fiscal year. The Committee determined the specific non-financial corporate goals to be met and applied a weight for each goal in consultation with management. Achievement of the non-financial corporate goals was measured in two six-month bonus periods. The cash bonus incentive amounts for the first half of fiscal 2010 were determined at the beginning of the third fiscal quarter of the current fiscal year while the cash bonus incentive amounts for the second half of fiscal 2010 were determinate at the beginning of the first fiscal quarter of the following fiscal year.

The individual target bonus for each of our named executive officers was established when the named executive officer was hired to his or her position and is based upon a percent of his or her salary. Each year, the Committee validates that the target bonus remains appropriate for the officer’s role based on market data. An executive officer can earn between 0% and 200% of his or her target incentive. The Committee referenced the same Radford survey data discussed above for each position held by an executive officer to assist us in determining cash bonus incentive targets as a percentage of base salary. As with other elements of compensation, the Committee focused principally on the 50th percentile of market. The bonus levels awarded to our executive officers were based on our achievement levels with respect to the financial and non-financial corporate goals, and on the basis of their individual performance. The differences in target bonuses among our named executive

9

officers were based on their relative positions and responsibilities within our company and were based on the relative target bonus amounts reflected in the survey data. For fiscal 2010, the target bonus payment for Mr. Sundaresh was 85% of his annual base salary, and 50% of Mr. Lowe’s and Ms. Dotz’s respective annual base salaries. Mr. Noellert was not eligible to participate in our AIP, as his target bonus payment was tied to sales achievement. Mr. Quicke was also not eligible to participate in our AIP. Based upon this structure, Mr. Sundaresh could have received an actual bonus of between 0% and 170% of his annual base salary for the fiscal year. The annual target bonus was 85% of his annual base salary, or $382,500.

The non-financial corporate goals as discussed below are typically proposed by the CEO to the Committee, refined in response to the Committee’s guidance, and ultimately determined by the Committee. The performance factors utilized by the Committee and the CEO in the case of the named executive officers were: 1) performance to their individual and organizational goals; 2) contributions to achievement of the corporate goals; 3) contributions to achievement of the financial goals; and 4) subjective evaluation of their leadership. These goals have been intended to be difficult but achievable. Individual performance for executive officers, other than our CEO, is based on an evaluation by our CEO and the Committee, and the Committee determines the level of our CEO’s achievement of his individual goals and discusses this with the Board. The Committee also discusses with the Board our performance with respect to financial and non-financial goals, based on management’s assessment and recommendations to the Committee, after referring to the relevant performance data, including in some cases preliminary unaudited financials, as provided to the Committee by management. The Committee reserves the right to adjust upward or downward based on the final audited financials.

The financial goal achievement for fiscal 2010 was not attained as we incurred a negative OPBT during the fiscal year. In order to reach a minimum payment level for the financial goal, the AIP required the achievement of an OPBT above $0. The non-financial corporate goals achievement was at 55% (on a weighted average basis) for the first half of fiscal 2010 and 87.5% (on a weighted average basis) for the second half of fiscal 2010. The non-financial corporate goals included specific engineering milestones, the successful launch and design wins of the MaxIQ product line and other targeted ADPT products within large datacenter accounts, partnership agreements relating to compression and encryption, Intellectual Property sale transactions and a reduction of operating expenses. The Committee established these goals as stretch goals and believed that, taken as a whole, they were achievable, but challenging to accomplish. As a result of the level of achievement, the Committee approved a funding budget for the AIP Pool of 35.625% for the fiscal year. The funding budget was determined by the following weighted average calculation: (55% x 25% corporate goals for the first half of fiscal 2010, or 13.75%) plus (87.5% x 25% corporate goals for the second half of fiscal 2010, or 21.875%) plus (0% x 75% financial goals, or 0%) = 35.625%. Using its discretion, the Committee recommended, and the Board adopted, a zero cash bonus incentive award for Mr. Sundaresh for the non-financial corporate goals achieved in the first half of fiscal 2010. Mr. Sundaresh was not eligible for the non-financial corporate goal attainment award for the second half of fiscal 2010 due to his termination on January 4, 2010. Ms. Dotz’s budgeted target was $132,500 for the first half of fiscal 2010 and $162,500 for the second half of fiscal 2010; the Committee approved an actual non-financial corporate goal attainment award of $16,000 for the first half of fiscal 2010 and $18,000 for the second half of fiscal 2010. The amounts were determined after taking into account Ms. Dotz’s leadership, fiscal management, and participation in the Sale of Operations. Mr. Lowe’s budgeted target was $120,000; the Committee approved an actual corporate goal attainment award of $12,000 for the first half of fiscal 2010. Mr. Lowe was not eligible for the corporate goal attainment award for the second half of fiscal 2010 as he was terminated on March 5, 2010. The amount was determined after taking into account Mr. Lowe’s project management of the launch of SSD Cache products in datacenters and the project management of the patent clusters. Messrs. Noellert and Quicke were not eligible to participate in our AIP.

The following table provides information with respect to the cash bonus incentives earned under the AIP in fiscal 2010, which for each named executive officer was significantly less than his or her annual target.

Name

Role
   Annual Base
Salary⁽¹⁾    Annual
Target
% of
Annual Base
Salary⁽²⁾ Annual
Achieved
% of
Annual Base
Salary Total
Cash Bonus
Incentive
Subramanian “Sundi”
Sundaresh⁽³⁾
   Former President and Chief Executive Officer    $ 450,000    85 % 0 % $ —
John J. Quicke⁽⁴⁾
   Interim President and Chief Executive Officer    N/A    N/A    N/A    N/A
Mary L. Dotz
   Vice President and Chief Financial Officer    $ 295,000    50 % 11.5 % $ 34,000
Marcus D. Lowe⁽⁵⁾
   Former Vice President of Marketing and Business Development    $ 240,000    50 % 10.0 % $ 12,000
John Noellert⁽⁶⁾
   Former Vice President of World Wide Sales    $ 217,000    N/A    N/A    N/A

~~(1)~~

~~The amounts shown in this column represent the annual base salary used to calculate the cash bonus incentive to be earned based upon multiplying it by a certain percentage.~~

~~(2)~~

The amounts shown in this column represent the percentage used to calculate the cash bonus incentive to be earned based upon multiplying it by the annual base salary, which was re-evaluated by the Committee at the beginning of fiscal 2010.

~~(3)~~

As discussed above, Mr. Sundaresh’s employment with us was terminated effective January 4, 2010. As a result, the cash bonus incentive that Mr. Sundaresh received was based on one six month period only (the first half of fiscal 2010), in which the Board, based on the recommendation of the Committee, did not award him any cash bonus incentive.

~~(4)~~

~~Mr. Quicke was not eligible to participate in the AIP.~~

~~(5)~~

As discussed above, Mr. Lowe’s employment with us was terminated effective March 5, 2010. As a result, the cash bonus incentive that Mr. Lowe received was based on one six month period only (the first half of fiscal 2010).

~~(6)~~

Mr. Noellert was not eligible to participate in the AIP, as his target bonus payment was tied to sales achievement. Mr. Noellert earned commissions of $49,440 in fiscal 2010, which represented 22.8% of the annual base salary.

~~Equity-Based Long Term Incentive Compensation~~. The Committee prefers to use stock options and performance-contingent stock awards to ensure that our executive officers have a continuing stake in our long-term success and to better align their interests with the interests of our stockholders. The Committee continued the past practice of granting options with a three-year vesting schedule to promote stockholder value growth, and introduced performance-contingent stock as a substitute for some of what would have been, in the past, time-based restricted stock grants. Vesting of the performance-contingent stock is tied to us achieving positive OPBT of 10% of revenue and a return on net assets of 20%. Stock options were also granted in August 2009. Additionally, Ms. Dotz was granted shares of restricted stock contingent upon receiving consideration in the Sale of Operations in an amount greater than $20 million. Ms. Dotz received this grant in December 2009 as an incentive to retain her and due to her increased responsibilities in assisting with the Sale of Operations. The Committee believes that performance-contingent stock and stock options provide management with an incentive to improve financial performance for the benefit of stockholders while also minimizing potential dilution and compensation expense.

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The 50th percentile of the Radford surveys noted above was generally used as a reference point in setting the level of executive officers’ equity awards. The Committee evaluated the value of awards to determine a recommended range for each of our executive officers based on their relative positions and responsibilities. Mr. Sundaresh’s equity compensation was evaluated by reference to the CEO position; Ms. Dotz to the CFO/Senior Financial Executive position; Mr. Lowe to the Senior Business Development Executive and/or the Senior Marketing Executive position; and Mr. Noellert to the Senior Worldwide Sales Executive position. The Committee granted options covering a larger number of shares subject to three-year vesting and a larger number of shares of three year performance-contingent stock rather than two-year time-based restricted stock due to its desire to emphasize longer term financial performance with the goal of benefiting our stockholders. The lower number of shares subject to awards granted to Mr. Lowe reflects the more limited nature of his business development role compared to the financial and sales roles held by Ms. Dotz and Mr. Noellert, respectively. The cumulative value of the awards were determined by calculating the stock option award value using a Black-Scholes methodology, and the time-based and performance-contingent restricted stock awards using their full-value at date of grant. The results were then compared to the 50th percentile of equity grants noted in the Radford surveys above.

~~The following table provides information of all equity awards granted to our named executive officers during fiscal 2010.~~

Name

Role
   April 2009
(FY’10)
Performance
Contingent
Stock Grant
(Shares)    August
2009
(FY’10)
Option
Grant
(Shares)    August 2009
(FY’10)
Performance
Contingent
Stock Grant
(Shares)    December 2009
(FY’10)
Performance
Contingent
Stock Grant
Payable in
Cash
(Shares)
Subramanian “Sundi”
Sundaresh
   Former President and Chief Executive Officer    100,000    300,000    75,000    —
John J. Quicke⁽¹⁾
   Interim President and Chief Executive Officer    N/A    N/A    N/A    N/A
Mary L. Dotz

Vice President and Chief
Financial Officer
   45,000    140,000    35,000    75,000
Marcus D. Lowe

Former Vice President of
Marketing and
Business Development
   30,000    100,000    25,000    —
John Noellert
   Former Vice President of World Wide Sales    45,000    120,000    27,500    —

~~(1)~~

Mr. Quicke did not receive any equity awards in connection with becoming the Interim President and CEO or on account of his services rendered in such capacity. All equity awards granted to Mr. Quicke were in his capacity as a director and are reflected in the Director Compensation Table below.

~~The “Grants of Plan-Based Awards” table below further describes the stock option grants and performance-contingent stock awards made to the executive officers during the fiscal year.~~

All equity-based awards have been reflected in our Consolidated Financial Statements. We do not have any program, plan or practice that requires us to grant equity-based awards to our executive officers on specified dates and we have not made grants of such awards that were timed to precede or follow the release or withholding of material non-public information. Our practice has been to grant equity-based awards at regularly scheduled Committee and Board meetings. The exercise prices of options are determined based on the closing price of our common stock on the date that the grants are approved.

~~Perquisites~~. Our executive officers are eligible for the same health and welfare programs and benefits as other ADPT employees. In addition, all vice president level executives, including our executive officers, receive a car allowance valued at $650 per month, and are eligible for an annual executive physical. In addition, executive officers receive reimbursement for personal financial and tax advice up to $2,500 per year, and

~~survivor benefit management services up to a maximum of $3,000. Mr. Quicke is not eligible to participate in any of the aforementioned perquisites.~~

~~Employment Contracts~~

As of March 31, 2010, we had entered into written employment agreements with each of our executive officers, except for Mr. Quicke, our Interim President and CEO, based on an assessment of competitive market terms and a determination of what is needed to attract and retain the executive officers. These employment agreements provide that if such officer is terminated other than for “cause” (which includes violation of material duties, refusal to perform his/her duties in good faith, breach of his/her employment agreement or employee proprietary information agreement, poor performance of duties, arrest for a felony or certain other crimes, substance abuse, violation of law or our policy, prolonged absence from duties or death), he or she is entitled to receive (1) his or her unpaid base salary and unused vacation benefits he or she has accrued prior to the date of his or her termination; (2) a one-time payment equal to 12 months of base salary for Mr. Sundaresh, and nine months of base salary for Ms. Dotz, and Messrs. Lowe and Noellert, plus an additional week of base salary for each year of service beyond three years of service with the Company; (3) outplacement services in an amount not to exceed $10,000 for Messrs. Sundaresh and Lowe or $5,000 for Ms. Dotz and Mr. Noellert; and (4) reimbursement for coverage for the executive officer and his or her dependents under ADPT’s health, vision and dental insurance plans pursuant to COBRA for a 12-month period for Mr. Sundaresh, and a nine-month period for Ms. Dotz and Messrs. Lowe and Noellert following the termination of employment. The Committee (including its predecessors) selected these amounts at the time these executives were hired by us (or promoted to an executive position) based on its reasoned judgment, including considering prior practice within ADPT, information gathered from outplacement companies and, for agreements entered into after the Committee retained Compensia in January 2007, severance data provided by Compensia.

Employment agreements for Ms. Dotz and Mr. Noellert had a three-year term. Employment agreements for Messrs. Sundaresh and Lowe did not have a term limit because they were given prior to term limit implementation by the Committee. Each of the employment agreements of Messrs. Sundaresh, Lowe and Noellert and Ms. Dotz also allow for the granting of stock options and stock awards under the 2004 Equity Incentive Plan as deemed appropriate by ADPT’s CEO and/or the Board. In addition, the employment agreement for Ms. Dotz provides for: (i) the payment of a $25,000 retention bonus on each of October 1, 2008 and April 1, 2009 if she is an active employee of us on those dates, (ii) an option to purchase 125,000 shares of our common stock at a price equal to the fair market value of our common stock on the date of grant, vesting with respect to 25% of the underlying shares on the first anniversary of Ms. Dotz’s hire date and with respect to the balance of the shares in equal quarterly installments over the following 36 months of service and (iii) a restricted stock award of 50,000 shares, 50% of which will vest on the first anniversary of her hire date and the remaining 50% of which will vest on the second anniversary of her hire date.

Mr. Sundaresh’s employment with us was terminated effective as of January 4, 2010. In connection with his termination, the Company and Mr. Sundaresh agreed upon the following severance arrangement in consideration of Mr. Sundaresh signing a general release in favor of us (collectively, the “Separation Agreement”): (1) a lump-sum severance payment equal to $460,000, less applicable taxes and withholdings; (2) reimbursement of COBRA premium benefit payments for up to one year or until January 31, 2011; (3) acceleration of 398,334 unvested stock options, which became immediately vested and exercisable on January 4, 2010; (4) the exercisability of all vested stock options on January 4, 2010 will be extended to the later of six months after a closing of a Sale of Operations or September 30, 2010, unless the term of the option expires prior to any of those dates; (5) acceleration of 50,000 unvested restricted stock awards on January 4, 2010; (6) cancellation of 175,000 unvested restricted stock units on January 4, 2010; and (7) reimbursement up to $10,000 for legal fees incurred in connection with negotiating the Separation Agreement.

In addition, Mr. Sundaresh entered into a Consulting Service Agreement with us dated as of December 21, 2009 (“Consulting Agreement”). The Consulting Agreement provides that Mr. Sundaresh will receive $500 per hour for services provided through December 31, 2010, and will also be reimbursed for reasonable expenses incurred in accordance with our policies and practices. The Consulting Agreement also provides for Mr. Sundaresh to receive

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additional compensation based on the achievement of specified objectives, including objectives related to the potential sale or other disposition of certain of our assets and business operations. The Separation Agreement and Consulting Agreement supersede all prior agreements, negotiations and discussions between the parties.

Mr. Noellert’s employment with us was terminated effective November 20, 2009. In connection with his termination, Mr. Noellert received: (1) a lump-sum payment equal to twelve months of his target annual earnings, less applicable taxes and withholdings; (2) a lump-sum payment equal to $12,000, less applicable taxes and withholdings; (3) reimbursement of COBRA benefit payments until November 30, 2010; (4) outplacement services valued at up to $5,000 and (5) reimbursement of $6,539 for legal fees incurred in connection with the termination.

Mr. Lowe’s employment with us was terminated effective March 5, 2010. In connection with his termination, Mr. Lowe received: (1) a lump-sum severance payment equal to $260,000, less applicable taxes and withholdings; (2) a targeted bonus payment equal to $130,000, less applicable taxes and withholdings; (3) reimbursement of COBRA benefit payments until March 31, 2011; and (4) outplacement services valued at up to $10,000.

~~Change of Control~~

As of March 31, 2010, the change of control arrangements of our executive officers, except for Mr. Quicke, our Interim President and CEO, with whom we do not have a change of control arrangement or agreement, are set forth in their employment agreements, and are as follows:

If within one year of a change of control (1) there is a material reduction of the annual base and target incentive compensation specified in his or her employment agreement to which he or she does not consent, (2) there is a failure of our successor after a change of control to assume his or her employment agreement, (3) his or her employment is terminated without cause by our successor, (4) there is a substantial change in his or her position or responsibility or (5) his or her position relocates to more than 25 additional commute miles (one way) and he or she elects to be terminated, then he or she will receive, upon signing a separation agreement and general release: (a) a one-time payment equal to his or her then-current annual base pay for Messrs. Lowe and Noellert (one and one-half times annual base pay in the case of Mr. Sundaresh and nine months of base pay for Ms. Dotz), (b) his or her then-current targeted bonus payout, (c) COBRA benefits for one year for Messrs. Sundaresh, Lowe and Noellert (nine months in the case of Ms. Dotz), (d) outplacement services not to exceed $10,000 for Messrs. Sundaresh and Lowe ($5,000 in the case of Ms. Dotz and Mr. Noellert), and (e) accelerated vesting of his or her stock options and restricted stock awards as provided for under the 2004 Equity Incentive Plan. The Agreements do not provide for any tax gross-ups.

Under our 1990 Stock Plan, 1999 Stock Plan and our 2004 Equity Incentive Plan, in the event of a change of control, any awards outstanding upon the date of such change of control will have “single trigger” vesting accelerated as of the date of such change of control as to an additional 25% of the unvested shares subject to such awards. We no longer make awards under our 1990 and 1999 Stock Plans. As discussed more fully below, the Committee determined during fiscal 2009, effective for awards made on or after October 23, 2008, to no longer make awards that provide for “single trigger” acceleration. However, the Committee left unchanged a provision in our 2004 Equity Incentive Plan providing that, if within 12 months following a change of control, an employee is terminated for any reason other than cause (a “double trigger”), such employee’s awards outstanding upon such change of control that are unexercisable and unvested on such date shall become 100% vested and exercisable. As discussed above, as a result of the change in the composition of the Board, a “change of control”, as defined in our 2004 Equity Incentive Plan, occurred for awards granted prior to October 23, 2008. As a result, (i) 25% of a participant’s unvested pre-October 23, 2008 awards vested and (ii) if an equity award recipient is involuntarily terminated prior to November 5, 2010, all remaining then unvested pre-October 23, 2008 awards will accelerate and be 100% vested and exercisable on such employee’s termination date. No “change of control” has occurred for awards granted on or after October 23, 2008.

The Committee eliminated the “single trigger” acceleration of vesting upon a change of control described above, effective for all awards on or after October 23, 2008. With this change and the three-year term limit, we believe our future executive severance and change of control practices are now more generally in line with those

in place at other technology companies. We believe these change of control arrangements, the value of which are contingent on the value obtained in a change of control transaction, effectively create incentives for our executive team to build stockholder value and to obtain the highest value possible should we be acquired in the future, despite the risk of losing employment and potentially not having the opportunity to otherwise vest in equity awards which comprise a significant component of each executive’s compensation. These arrangements are intended to attract and retain qualified executives who could have other job alternatives that may appear to them to be less risky absent these arrangements. Except for the acceleration of a portion of the grants previously given to our executive officers as described above, our change of control arrangements for our executive officers are “double trigger,” meaning that acceleration of vesting does not occur upon a change of control unless the executive’s employment is terminated involuntarily (other than for cause) within 12 months following the transaction. We believe this structure strikes the appropriate balance between executive recruitment and retention, the needs of potential acquiring companies, who often place significant value on retaining an executive team, and our desire to contain the cost of any change of control to our stockholders.

~~Nonqualified Deferred Compensation~~

The ADPT Deferred Compensation Plan was terminated in fiscal 2008 resulting in the distributions of funds held under the plan during fiscal 2008 to the named executive officers who participated in the plan.

~~Compensation Risk Assessment~~

The Committee reviewed our employee compensation policies and practices and determined that such policies and practices, taken as a whole, are not likely to have a material adverse effect on us. The Committee review included all elements of employee compensation, with particular attention paid to our AIP and equity grants, which the Committee believes would be the elements of our compensation that would be most likely to lead to excessive risk taking. The Committee does not believe that the AIP has led to excessive risk taking for participating employees based in part upon the fact that maximum payments under such program are capped and non-financial corporate goals are also utilized to determine cash incentive payments. The Committee does not believe that equity grants to employees in the form of stock options subject to three-year vesting and three-year performance contingent stock have led to excessive risk taking primarily because such grants are designed to align recipient employees’ interests with the longer term financial performance of the Company, although the Committee regularly reviews these incentive instruments to ensure that their structure and terms continue to provide the proper incentives to management.

Consistent with the emerging trend to defer certain types of bonus payments to help ensure that a material portion of executive bonus compensation is dependent on subsequent events that confirm that the bonus was well founded, effectively tying these type of rewards more closely to the actual outcomes that stockholders experience, when the Committee recommended and the Board approved on June 17, 2010 a discretionary bonus for Mr. Quicke, our Interim President and CEO, 50% of the bonus award was deferred to December 31, 2010. Payment of the deferred portion of the bonus is subject to the Committee’s and the Board’s determination that the benefits expected from the sale of the DPS Business have been substantially realized by the Company. In light of the sale of the DPS Business (described under “Actions Taken After the Completion of Fiscal 2010”) and other changes to our operations, the Committee will be re-evaluating our compensation policies and procedures going forward. As part of this re-evaluation, the Committee also plans to consider the potential merits of early implementation of a clawback policy, consistent with the provisions in the recently signed Dodd-Frank Wall Street Reform and Consumer Protection Act.

~~Actions Taken After the Completion of Fiscal 2010~~

On May 18, 2010, the Committee approved a 4% increase to the annual base salary or annual target incentives for employees providing transitional services after the sale of our business of providing data storage hardware and software solutions and products (“DPS Business”) to PMC-Sierra, Inc., including the salary of Ms. Dotz, our CFO, retroactive to April 1, 2010. Effective April 1, 2010, Ms. Dotz annual base salary was $338,000.

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~~On May 18, 2010, the Committee also agreed to modify and accelerate substantially all employee~~ unvested stock-based awards, including stock options, restricted stock awards and restricted stock units, including those ~~related to Ms. Dotz, our CFO.~~with performance-based vesting (none of which affect the Company’s Interim President and Chief Executive Officer). The ~~acceleration~~modification of the unvested stock-based awards ~~occurred~~was effective the earlier of (1) June 8, 2010, the date the Company consummated the ~~Asset~~ Purchase Agreement with PMC-Sierra ~~Inc.~~ for the sale of ~~certain assets~~the DPS Business and ~~for~~ PMC-Sierra ~~to assume~~assumed certain liabilities related to the DPS Business or (2) the date in which an employee was involuntarily terminated (other than for cause) as part of the actions wethe Company took related to its sale of the DPS Business. The modifications included the acceleration of unvested stock-based awards and a settlement of unvested stock-based awards in the form of a fixed cash payment, resulting in total stock-based compensation expense of $0.2 million and cash compensation expense of $1.2 million, respectively, for the Transition Period.

Stock-based compensation expense included in the Consolidated Statements of Operations for the Transition Period and fiscal 2012 and 2011 is as follows:

Stock-based compensation expense in the above table does not reflect any significant income tax expense, which is consistent with the Company’s treatment of income or loss from its United States operations for tax purposes. For the fiscal 2012 and 2011, and the Transition Period, there are no income tax benefits realized for the tax deductions from option exercises of the stock-based payment arrangements. In addition, there was no stock-based compensation costs capitalized as part of an asset in the Transition Period and fiscal 2012 and 2011 as the amounts were immaterial.

The Company used the Black-Scholes option pricing model for determining the estimated fair value for all stock-based awards. The fair value of the stock-based awards granted in the Transition Period and fiscal 2012 and 2011 were estimated using the following weighted-average assumptions:

The Company sold its business of providing data storage and software solutions and products (the “DPS Business”) to PMC-Sierra, Inc. (“PMC-Sierra”) on June 8, 2010. The purchase price for the DPS Business was $34.3 million, of which $29.3 million was received by the Company upon the closing of the transaction and the remaining $5.0 million was withheld in an escrow account (“DPS Holdback”). The DPS Holdback was released to the Company on June 8, 2011, one year after the consummation of the sale, except for $0.1 million to provide for one disputed claim, and was recognized as contingent consideration in discontinued operations when received. The $0.1 million was received in September 30, 2011. The Company recorded a gain of $10.7 million, net of taxes of $6.6 million, on the disposal of the DPS Business in the Transition Period, which is included in the “Loss from discontinued operations, net of taxes” in the Consolidated Statements of Operations.

Further, on June 8, 2010, the Company entered into a transition service agreement with PMC-Sierra, in which the Company provided certain services required for the operation of the DPS Business through December 2010 and the direct costs associated with providing these services were reimbursed by PMC-Sierra. As a result of the transition service agreement, cash of $1.7 million was received on behalf of PMC-Sierra upon collection of accounts receivable and was classified as “Restricted cash” and included in “Accounts payable” on the Company’s Consolidated Balance Sheets at December 31, 2010. In the Transition Period, the Company incurred approximately $1.3 million in direct costs under the transition service agreement with PMC-Sierra, which were reimbursed by PMC-Sierra.

In July 2011, the Company ceased its efforts to sell or license its intellectual property from the Aristos Business and finalized the wind down of such business. As such, the disposed DPS Business and wound down Aristos Business are reflected as discontinued operations in the accompanying financial statements and prior periods have been reclassified to conform to this presentation.

As disclosed above, in July 2012, the Company reclassified The Show to discontinued operations as it was not meeting projections, with no expectation to perform as represented when acquired.

Revenues and the components of income related to The Show, the DPS Business and the Aristos Business included in discontinued operations in the fiscal years ended December 31, 2012 and 2011, and nine-month transition period ended December 31, 2010 are as follows:

Income from discontinued operations for fiscal year ended December 31, 2011, includes the sale of patents from the DPS Business for $1.9 million and activity from The Show. There was no financial activity from the Aristos Business during fiscal year 2011. The loss from discontinued operations for the fiscal year ended December 31, 2012 includes activity of The Show only.

During February 2012, the Company’s Board of Directors executed a written consent permitting it to invest up to $10 million in publicly traded companies engaged in certain oilfield servicing, energy services, and related businesses, which was an exception to its investment policy at that time. In June 2012, the Board established an Investment Committee, which was formed to develop investment strategies for the Company and to set and implement investment policies with respect to its cash. The Investment Committee was directed by the Board to establish and implement an investment policy for the Company’s portfolio that meets the following general objectives: preserve principal; maximize total return given overall market conditions; meet internal liquidity requirements; and comply with applicable accounting, internal control and reporting requirements and standards. The Investment Committee is authorized, among other things, to invest its excess cash directly or allocate investments to outside managers for investment in equity or debt securities, provided that the Investment Committee may not invest more than $25 million in any single investment or with any single asset manager without the Board’s approval. Given the overall market conditions, the Company regularly reviews its investment portfolio to ensure adherence to the investment policy and to monitor individual investments for risk analysis and proper valuation.

The Company’s portfolio of marketable securities at December 31, 2012 was as follows:

The Company’s portfolio of marketable securities at December 31, 2011 was as follows:

Sales of marketable securities resulted in gross realized gains of $0.6 million, $2.0 million, and $1.1 million for fiscal 2012 and 2011, and the Transition Period, respectively. Sales of marketable securities resulted in gross realized losses of $0.3 million, $0.3 million, $0.5 million for fiscal 2012 and 2011, and the Transition Period, respectively.

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of maturity for individual securities that were in an unrealized loss position at December 31, 2012:

The following table summarizes the fair value and gross unrealized losses of the Company’s available-for-sale marketable securities, aggregated by type of investment instrument and length of maturity for individual securities that were in an unrealized loss position at December 31, 2011:

The Company’s investment portfolio consists of both corporate and government securities that generally mature within three years. The longer the duration of these securities, the more susceptible they are to changes in market interest rates and bond yields. As yields increase, those securities purchased with a lower yield-at-cost show a mark-to-market unrealized loss. All unrealized losses are due to changes in interest rates and bond yields. The Company has considered all available evidence and determined that the marketable securities in which unrealized losses were recorded in the Transition Period and fiscal years 2012 and 2011 were deemed to be temporary. The Company holds its marketable securities as available-for-sale and marks them to market through a corresponding adjustment to other comprehensive income (loss) in stockholders’ equity. Classification of marketable securities as a current asset is based on the intended holding period and realizability of the asset.

The amortized cost and estimated fair value of investments in available-for-sale debt securities at December 31, 2012, by contractual maturity, were as follows:

Changes, net of tax, in Accumulated other comprehensive income are as follows:

Fair value is defined as the price that would be received for selling an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The accounting standard surrounding fair value measurements establishes a fair value hierarchy, consisting of three levels, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

The Company utilized levels 1, 2 and 3 to value its financial assets on a recurring basis. Level 1 instruments use quoted prices in active markets for identical assets or liabilities, which include the Company’s cash accounts, short-term deposits and money market funds as these specific assets are liquid. Level 1 instruments also include United States government securities, government agencies, and state and municipalities, as these securities are backed by the federal or state governments and traded in active markets frequently with sufficient volume. Level 2 instruments are valued using the market approach, which uses quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities and include mortgage-backed securities, corporate obligations and asset-backed securities as similar or identical instruments can be found in active markets. Level 3 is supported by little or no market activity and requires a high level of judgment to determine fair value, which includes the Company’s two venture fund investments and the Rogue contingent consideration. The carrying amount of the contingent consideration is measured at fair value on a recurring basis using unobservable inputs in which little or no market activity exists. The Company periodically monitors its two venture capital funds and records these investments within “Other long-term assets” on the Condensed Balance Sheets based on quarterly statements the Company receives from each of the funds. The statements are generally received one quarter in arrears, as more timely valuations are not practical. The statements reflect the net asset value, which the Company uses to determine the fair value for these investments, which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment company or prepare their financial statements consistent with the measurement principles of an investment company. The assumptions used by the Company, due to lack of observable inputs, may impact the fair value of these equity investments in future periods. In the event that the carrying value of its equity investments exceeds their fair value, or the decline in value is determined to be other-than-temporary, the carrying value is reduced to its current fair value, which is recorded in “Interest and other income, net,” in the Condensed Statements of Operations. At December 31, 2012, there were no significant transfers that occurred between any of the levels of the Company’s financial assets.

A summary of financial assets measured at fair value on a recurring basis at December 31, 2012 is as follows:

A summary of financial assets measured at fair value on a recurring basis at December 31, 2011 is as follows:

A reconciliation of the beginning and ending balances of the Rogue contingent consideration for the years ended December 31, 2012 and 2011 is as follows:

The Company’s other financial instruments include accounts payable and accrued and other liabilities. Carrying values of these financial liabilities approximate their fair values due to the relatively short maturity of these items. The related cost basis for the Company’s 3/4% Convertible Senior Notes due December 22, 2023 (the “3/4% Notes”) at December 31, 2012 and 2011 was approximately $0.3 million on both dates. Although the remaining balance of its 3/4% Notes is relatively small and the market trading is very limited, the Company expects the cost basis for the 3/4% Notes of approximately $0.3 million at December 31, 2012 to approximate fair value. The Company’s convertible debt is recorded at its carrying value, not the estimated fair value.

The Company utilized Level 3 to value its non-financial assets on a non-recurring basis. Level 3 is categorized as significant unobservable inputs. The Company has no non-financial assets measured at fair value on a non-recurring basis as of December 31, 2012 and 2011. At December 31, 2010, the Company had $6.0 million of long-lived assets held-for-sale classified as Level 3 non-financial assets measured at fair value on a non-recurring basis. These assets were originally classified as held and used for $10.1 million, but were written down to the impaired fair value of $6.0 million on July 2, 2010, resulting in an impairment charge of $4.1 million included in the Consolidated Statement of Operations for the Transition Period. Other long-lived assets held and used were written down to zero value during the Transition Period, resulting in an impairment charge of $6.1 million.

The components of property and equipment, net, at December 31, 2012 and 2011 are as follows:

Assets in progress as of December 31, 2012 include a new indoor facility and restaurant building renovations at Baseball Heaven and a rig, service trucks and a building at Sun Well. The estimated cost to complete these assets is $1.3 million.

Depreciation expense for fiscal 2012 was $7.8 million, with $6.4 million and $1.4 million being included in “Cost of revenues” and “Selling, general and administrative” expenses, respectively, in the Consolidated Statements of Operations. Depreciation expense for fiscal 2011 was $0.3 million, with $0.1 million and $0.2 million being included in “Cost of revenues” and “Selling, general and administrative” expenses, respectively, in the Consolidated Statements of Operations. Depreciation expense in the Transition Period was $0.3 million and was included in “Loss from discontinued operations, net of taxes.” The Company impaired certain of its assets in the Transition Period, resulting in a write-down of $4.1 million, which was also included in “Loss from discontinued operations.”

A reconciliation of the changes to the Company’s carrying amount of goodwill for fiscal 2012 and 2011 are as follows:

The components of goodwill at December 31, 2012 and 2011 are as follows:

The acquisitions made in fiscal 2012 and 2011 resulted in customer relationships and trade names aggregating $47.4 million as of December 31, 2012.

The components of intangible assets, net, at December 31, 2012and their amortization details are as follows:

The components of intangible assets, net, at December 31, 2011and their amortization details are as follows:

Estimated aggregate future amortization expenses for the next five years for the intangible assets are as follows:

Amortization expense for fiscal 2012 was $7.5 million, which is included in “Selling, general and administrative” expenses in the Consolidated Statement of Operations. Amortization expense for fiscal 2011 was $49,000, which is included in “Selling, general and administrative” expenses in the Consolidated Statements of Operations. Amortization expense for the Transition Period was $9.9 million and is included in “Loss from discontinued operations, net of taxes” in the Consolidated Statements of Operations.

In June 2010, the Company made a decision to wind down its Aristos Business and notified its customers that final shipments would occur by the end of September 2010. The Company also planned to put its building up for sale towards the end of the Transition Period. As a result of these actions, the Company evaluated the carrying value of its long-lived assets at July 2, 2010 and determined that the carrying value of such assets may not be fully recoverable. The Company then measured the impairment loss and recognized the amount in which the carrying value exceeded the estimated fair value by recording an impairment charge of $10.2 million in the Transition Period, which is included in “Loss from discontinued operations, net of taxes,” in the Consolidated Statements of Operations. Of the $10.2 million impairment charge, $6.1 million related to the write off of intangible assets and the remaining $4.1 million related to the reduction of the carrying value of its property and equipment, net, to its estimated fair value. The estimated fair value was based on the market approach and considered the perspective of market participants using or exchanging the Company’s long-lived assets. The estimation of the impairment involved assumptions that required judgment by the Company.

In December 2003, the Company issued $225.0 million in aggregate principal amount of 3/4% Notes. The issuance costs associated with the 3/4% Notes totaled $6.8 million, which was amortized to interest expense over five years, and the net proceeds to the Company from the offering of the 3/4% Notes were $218.2 million. The Company pays cash interest at an annual rate of 3/4% of the principal amount at issuance, payable semi-annually on June 22 and December 22 of each year. The 3/4% Notes are subordinated to all existing and future senior indebtedness of the Company. The Company does not apply the accounting standard issued in May 2008 by the FASB with regard to applying a nonconvertible debt borrowing rate on its 3/4% Notes, as the 3/4% Notes may not be settled in cash or other assets upon conversion.

The 3/4% Notes are convertible at the option of the holders into shares of the Company’s common stock, par value $0.001 per share, only under the following circumstances: (1) prior to December 22, 2021, on any date during a fiscal quarter if the closing sale price of the Company’s common stock was more than 120% of the then current conversion price of the 3/4% Notes for at least 20 trading days in the period of the 30 consecutive trading days ending on the last trading day of the previous fiscal quarter, (2) on or after December 22, 2021, if the closing sale price of the Company’s common stock was more than 120% of the then current conversion price of the 3/4% Notes, (3) if the Company elects to redeem the 3/4% Notes, (4) upon the occurrence of specified corporate transactions or significant distributions to holders of the Company’s common stock occur or (5) subject to certain exceptions, for the five consecutive business day period following any five consecutive trading day period in which the average trading price of the 3/4% Notes was less than 98% of the average of the sale price of the Company’s common stock during such five-day trading period multiplied by the 3/4% Notes then current conversion rate. Subject to the above conditions, each $1,000 principal amount of 3/4% Notes is convertible into approximately 8.5441 shares of the Company’s common stock (equivalent to an initial conversion price of approximately $117.04 per share of common stock).

In fiscal 2010, the Company repurchased a total of $0.1 million at a price equal to 100% of the principal amount of the 3/4% Notes. At December 31, 2012 and 2011, the Company had a remaining liability of $0.3 million of aggregate principal amount related to its 3/4% Notes. Each remaining holder of the 3/4% Notes may require the Company to purchase all or a portion of its 3/4% Notes on December 22, 2013, on December 22, 2018 or upon the occurrence of a change of control (as defined in the indenture governing the 3/4% Notes) at a price equal to the principal amount of 3/4% Notes being purchased plus any accrued and unpaid interest and the Company may redeem some or all of the 3/4% Notes for cash at a redemption price equal to 100% of the principal amount of the notes being redeemed, plus accrued interest to, but excluding, the redemption date. The Company may seek to make open market repurchases of the remaining balance of its 3/4% Notes within the next twelve months.

The components of accrued and other liabilities at December 31, 2012 and 2011 are as follows:

The components of other long-term liabilities at December 31, 2012 and 2011 are as follows:

The tax-related long-term liabilities relate primarily to FIN 48 uncertainties primarily associated with our foreign subsidiaries. Through its acquisition of SWH, the Company has a phantom stock plan agreement (the “Phantom Plan”), in which the board of directors is authorized to grant phantom shares to employees and consultants. The value of the phantom shares outstanding was fixed as a result of the acquisition. If employees or consultants terminate from the Company other than by death or disability, their unvested shares are returned to the Phantom Plan. Phantom stockholders are entitled to receive a cash payment for their vested shares on February 1, 2016, unless there is a change of control or employee death. The Company is accounting for the unvested portion of the Phantom Plan as post-combination compensation expense by accreting a liability over the vesting period.

Sun Well has a credit agreement with Wells Fargo Bank, National Association that includes a term loan of $20.0 million and a revolving line of credit for up to $5.0 million. The loans are secured by the assets of Sun Well and bear interest, at the option of Sun Well, at LIBOR plus 3.5% or the greater of (a) the bank’s prime rate, (b) the Federal Funds Rate plus 1.5%, or (c) the Daily One-Month LIBOR rate plus 1.5% for base rate loans. Both options are subject to leverage ratio adjustments. The interest payments are made monthly. The term loan is repayable in $1.0 million quarterly principal installments from September 30, 2011 through June 30, 2015. Sun Well borrowed $20.0 million on the term loan in July 2011 and has made $6.0 million and $1.0 million in scheduled and extra principal payments through December 31, 2012, respectively. Borrowings under the revolving loan, which are determined based on eligible accounts receivable, mature on June 30, 2015 with a balloon payment. There is no balance due on the revolving loan as of December, 2012. Under the agreement, Sun Well is subject to certain financial covenants, with which it was in compliance as of December 31, 2012.

The future principal payments due on the notes payable are as follows:

The Company made a principal payment of $10.0 million in February 2013 but intends to continue with the scheduled quarterly payments.

Through its acquisitions, the Company acquired certain equipment under capital lease obligations. The following is a schedule of the future annual minimum payments for these leases as of December 31, 2012:

During fiscal 2011, the Company completed all of its outstanding restructuring plans. The Company had implemented restructuring plans in the Transition Period, and in fiscal 2010 and 2009. In addition, the ~~Committee approved~~Company had an acquisition-related restructuring plan in place from its fiscal year ended March 31, 2006. The goals of these plans were to bring the Company’s operational expenses to appropriate levels relative to its historical net revenues, while simultaneously implementing extensive company-wide expense-control programs. All expenses, including adjustments, associated with the Company’s restructuring plans are included in “Restructuring charges” and/or “Loss from discontinued operations, net of taxes” in the Consolidated Statements of Operations.

The activity in the restructuring accrual for all outstanding plans from December 31, 2010 through December 31, 2011 was as follows:

All restructuring plans were completed as of December 31, 2011 and the Company does not anticipate further plans being implemented.

Through its acquisitions, the Company assumed additional leases of property with the following non-cancelable obligations:

Rent expense for property and equipment for the fiscal year ended December 31, 2012 was $2.7 million as a result of the various acquisitions. Rent expense for fiscal 2011 and the Transition Period were immaterial.

From time to time, we are subject to litigation or claims, including claims related to businesses that we wound down or sold, which are normal in the course of business, and while the results of such litigation matters and claims cannot be predicted with certainty, we believe that the final outcome of such matters will not have a material adverse impact on our financial position, results of operations or cash ~~bonuses~~flows. However, because of ~~approximately $2.8 million in lieu~~the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financial condition, results of operations and cash flows could be materially and adversely affected.

For an additional discussion of certain ~~unvested-stock-based awards that were~~risks associated with legal proceedings, see “Item 1A. Risk Factors” of this Annual Report on Form 10-K.

The Company has agreements whereby it indemnified its directors and certain of its officers for certain events or occurrences while the officer or director is, or was, serving at the Company’s request in such capacity. These indemnification agreements are not ~~accelerated for~~subject to a maximum loss clause; however, the Company maintains a director and officer insurance policy which may cover all ~~employees, including Ms. Dotz, our CFO, for which Ms. Dotz received~~or a ~~cash bonus~~portion of ~~$0.1 million. The actions approved by~~ the ~~Committee did~~liabilities arising from its obligation to indemnify its directors and officers. It is not ~~impact stock-based awards previously granted~~possible to ~~Mr. Quicke, our Interim President and CEO, in his capacity as~~make a ~~member~~reasonable estimate of ~~our Board.~~

~~In June 2010, Ms. Dotz also received $0.1 million bonus~~the maximum potential amount of future payments under these or similar agreements due to the conditional nature of the Company’s obligations and the unique facts and circumstances involved in each particular agreement. Historically, the Company has not incurred significant costs to defend lawsuits or settle claims related to such agreements and no amount has been accrued in the accompanying Consolidated Financial Statements with respect to these indemnification guarantees.

In addition, the Company entered into agreements with PMC-Sierra that included certain indemnification obligations related to the sale of ~~consideration received~~the DPS Business. These indemnification obligations generally required the Company to compensate the other party for certain damages and costs incurred as a result of third party claims. In these circumstances, payment by the ~~consummation~~Company was conditional on the other party making a claim pursuant to the procedures specified in the particular agreements, which procedures typically allowed the Company to challenge the other party’s claims. Further, the Company’s obligations under these agreements was limited in terms of time and/or amount, and in some instances, the Company may have had recourse against third parties for certain payments made by it under these agreements. No liability resulted from the agreements with PMC-Sierra.

The Company provided an accrual for estimated future warranty costs based upon the historical relationship of warranty costs to sales. The estimated future warranty obligations related to product sales were recorded in the period in which the related revenue was recognized. The estimated future warranty obligations were affected by sales volumes, product failure rates, material usage and replacement costs incurred in correcting a product failure. If actual product failure rates, material usage or replacement costs differed from the Company’s estimates, revisions to the estimated warranty obligations would be required. Substantially all of the Company’s product warranty liability transferred to PMC-Sierra upon the sale of the DPS Business, ~~to PMC-Sierra on June 8,~~except those amounts associated with the Company’s Aristos Business. As of December 31, 2010, ~~in relation~~all product warranties were fulfilled.

The components of interest and other income, net, for fiscal 2012, fiscal 2011, and the Transition Period are as follows:

The components of income (loss) from continuing operations before benefit from (provision for) income taxes for all periods presented are as follows:

The components of the benefit from (provision) for income taxes from continuing operations for all periods presented are as follows:

The Company’s effective tax rate differed from the federal statutory rate for all periods presented as follows:

The Company recorded a benefit from income taxes of $0.2 million for the fiscal year ended December ~~2009,~~31, 2011, primarily due to the reversal of reserves for foreign taxes as a result of a favorable settlement in Singapore. During fiscal 2011, the Company made significant changes to its historic investment portfolio to move to primarily low-risk interest-bearing government securities. These changes were significant enough, in the Company’s judgment, to consider the legacy portfolio to have been disposed of for the purpose of tracking a disproportionate tax effect that arose in fiscal 2008. Fiscal 2011 also included the Company realizing certain currency translation gains due to substantial liquidation of certain of its foreign subsidiaries and the receipt of dividends from foreign subsidiaries. These taxes were partially offset by income tax benefits from losses incurred in the Company’s foreign jurisdictions and the reversal of reserves for certain foreign taxes.

In the Transition Period, the Company’s tax provision was associated with losses incurred from continuing operations being offset by state minimum taxes and taxes related to foreign subsidiaries. The tax provision included tax expenses of $7.9 million primarily due to changes in judgment related to the ongoing audits in its foreign jurisdictions.

The significant components of the Company’s deferred tax assets and liabilities at December 31, 2012 and 2011 are as follows:

The significant components of the Company’s deferred tax assets and liabilities at December 31, 2012 and 2011 were classified in the Consolidated Balance Sheets as follows:

The Company continues to provide United States deferred income taxes and foreign withholding taxes on its undistributed earnings. At December 31, 2012 and 2011, the Company recorded a deferred tax liability of $29.6 million and $30.7 million, respectively related to the foreign undistributed earnings, which was offset by a reduction in the Company’s valuation allowance against its deferred tax assets.

The Company continues to monitor the status of its NOLs, which may be used to offset future taxable income. If the Company underwent an ownership change, the NOLs would be subject to an annual limit on the amount of the taxable income that may be offset by its NOLs generated prior to the ownership change and additionally, the Company may be unable to use a significant portion of its NOLs to offset taxable income. At December 31, 2012, the Company had net operating loss carryforwards of $126.0 million for federal and $150.4 million for state purposes that expire in various years beginning in 2019 for federal and are currently expiring for state purposes. At December 31, 2012, the Company had research and development credits of $30.3 million for federal purposes that expire in various years beginning in 2019 and credits of $17.7 million for state purposes that carry forward indefinitely until fully exhausted. At December 31, 2012, the Company had foreign tax credits of $1.6 million that expire in various years beginning in 2013. Of the federal net operating loss carryforwards, $10.2 million were related to stock option deductions, the tax benefit of which will be credited to additional paid-in capital when realized.

The Company recognizes interest and/or penalties related to uncertain tax positions within “Benefit from (provision for) income taxes” in its Consolidated Statements of Operations. To the extent that accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period that such determination is made. The amount of interest and penalties accrued during fiscal year 2012 and 2011, and the Transition Period was immaterial.

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions in light of legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the ~~achievement~~Company conducts or formerly conducted business. Management believes that it is not reasonably possible that the gross unrecognized tax benefits will change significantly within the next 12 months; however, tax audits remain open and the outcome of any tax audits are inherently uncertain, which could change this judgment in any given quarter.

As of December 31, 2012, the Company’s total gross unrecognized tax benefits were $26.4 million, of which $7.4 million, if recognized, would affect the effective tax rate. There was an overall decrease of $3.5 million in the Company’s gross unrealized tax benefits from fiscal 2011 to fiscal 2012, primarily due to the reversal of reserves for foreign taxes as a result of an assessment with the Singapore taxing authorities. The Company recorded a benefit from income taxes of $1.4 million for the year ended December 31, 2012, due to a refund received as a result of a ~~Sale~~settlement in Singapore.

The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates or formerly operated. As of ~~Operations occurred~~December 31, 2012, fiscal years 2005 onward remained open to examination by the U.S. taxing authorities and fiscal years 2000 onward remained open to examination in various foreign jurisdictions. U.S. tax attributes generated in fiscal years 2000 onward also remain subject to adjustment in subsequent audits when they are utilized.

Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to all potentially dilutive common shares outstanding during the period, which include certain stock–based awards, calculated using the treasury stock method, and convertible notes which are potentially dilutive at certain earnings levels, and are computed using the if-converted method. As disclosed in Note 1, all share information has been adjusted to reflect the Reverse/Forward Split.

A reconciliation of the numerator and denominator of the basic and diluted income (loss) per share computations for continuing operations, discontinued operations and net income (loss) for all periods presented is as follows:

Diluted loss per share for the Transition Period was based on the basic weighted average shares outstanding only, as the inclusion of any common stock equivalents would have been anti-dilutive. For the “Loss from continuing operations, net of taxes,” for fiscal 2011, the basic weighted average shares outstanding was also used, as the inclusion of any common stock equivalents would have been anti-dilutive. The potential common shares excluded for each of the periods presented are as follows:

Segment information for continuing operations as of December 31, 2012 and for the fiscal year then ended is as follows:

Two customers within the Steel Energy reporting segment comprise 10% or more of the Company’s consolidated net revenues for fiscal 2012 (Customer A had $11.1 million and Customer B had $11.0 million of net revenues, with $3.6 million and $2.9 million included in accounts receivable as of December 31, 2012, respectively). In addition, the top 15 Steel Energy customers made up 86% of consolidated net revenues in fiscal 2012

Segment information for continuing operations as of December 31, 2011 and for the fiscal year then ended is as follows:

No customers comprised 10% or more of the Company’s net revenues for fiscal 2011.

As disclosed in Note 3, pursuant to the terms of the Share Purchase Agreement, the Company acquired all of the capital stock of SWH for an ~~amount greater than $20~~acquisition price aggregating $68.7 million. The aggregate acquisition price consisted of the issuance of 2,027,500 shares of the Company’s common stock (valued at $30 per share) and cash of $7.9 million. Steel Partners owned approximately 40% of the Company’s outstanding common stock and 85% of BNS prior to the execution of the Share Purchase Agreement. The Company appointed a special committee (the “Special Committee”) comprised solely of independent directors to consider and negotiate the transaction, as did BNS, because of the interest of Steel Partners in each company. The Special Committee, with the assistance of its independent financial advisor, considered a number of factors in negotiating the acquisition price, including, without limitation, the fairness opinion from its financial advisor.

As a result of the ~~bonus payment,~~acquisition and additional shares acquired on the ~~awards granted in December 2009 were cancelled.~~

~~On June 17, 2010, the Board, upon the recommendation~~open market, Steel Partners beneficially owned approximately 51.1% of the ~~Committee, approved a discretionary~~Company’s outstanding common stock. Jack L. Howard, John J. Quicke, and Warren G. Lichtenstein are directors of the Company and each such person is deemed to be an affiliate of Steel Partners under the rules of the Securities Exchange Act of 1934, as amended. Each of the three directors is compensated with cash ~~bonus of $500,000 to~~compensation and equity awards or equity-based awards in amounts that are consistent with the Company’s Non-employee Director Compensation Policy. In addition, Mr. Quicke ~~our~~currently serves as the Interim President and CEO of the Company. He was previously compensated $30,000 by the Company per month in connection with ~~his successful efforts~~this role (which was in addition to ~~consummate~~ the ~~sale~~compensation he receives as a non-employee Board member) prior to the entry into the Amended and Restated Management Services Agreement described below. Mr. Quicke also serves as an executive of other affiliates of Steel Partners.

Effective October 1, 2011, the Company contracted with SP Corporate Services LLC (“SP Corporate”) to provide financial management and administrative services, including the services of a CFO. Under the terms of the ~~DPS Business to PMC-Sierra. Of~~services agreement, SP Corporate was receiving $35,000 monthly for the ~~$500,000 cash bonus, $250,000~~provision of such services. Effective August 1, 2012, the agreement was ~~paid in July,~~amended and restated whereby SP Corporate provides expanded services including the ~~remaining $250,000 is payable on~~positions of CEO and CFO, responsibility for financing, regulatory reporting, and other administrative and operational functions. SP Corporate receives $300,000 per month for these expanded services. This services agreement was approved by a committee of the Company’s independent directors. During the years ended December 31, ~~2010, upon~~2012 and 2011, the Company ~~substantially realizing~~incurred $2.1 million and $0.3 million, respectively, under the ~~benefit from the sale~~terms of the ~~DPS Business~~services agreements with SP Corporate. In addition, the Company reimburses SP Corporate and other Steel Partners affiliates, for certain expenses incurred on the Company’s behalf. During the years ended December 31, 2012 and 2011, the Company incurred $0.6 million and $0.1 million of expense reimbursements, respectively. As of December 31, 2012 and 2011, the Company owed SP Corporate $0.3 million and $0.1 million, respectively.

The Company holds $15.1 million of short-term deposits at WebBank, an ~~effective transition following the disposition~~affiliate of Steel Partners, and recorded interest income of $0.1 million from them in fiscal 2012.

The Investment Committee of the ~~DPS Business.~~

~~Ms. Dotz employment~~Board of Directors is responsible for selecting executing brokers. Securities transactions for the Company are allocated to brokers on the basis of reliability and best price and execution. During fiscal 2012, the Investment Committee selected Mutual Securities as an introducing broker and may direct a substantial portion of the Company’s trades to such firm among others. A member of the Investment Committee is affiliated with usMutual Securities. The Investment Committee only uses Mutual Securities when such use would not compromise the Investment Committee's obligation to seek best price and execution. The Company may pay commissions to Mutual Securities, which are higher than those that can be obtained elsewhere, provided that it believes that the rates paid are competitive institutional rates. Mutual Securities also served as an introducing broker for the Company's trades. The Commissions paid by the Company to Mutual securities were approximately $0.1 million for fiscal 2012. Such commissions are included in the net investment gains (losses) included in “Interest and other income, net” in the Consolidated Statement of Operations. The portion of the commission paid to Mutual Securities ultimately received by such Investment committee member is net of clearing and other charges.

Through its acquisition of Sun Well, the Company assumed long-term debt and capital lease obligations for equipment.

On January 30, 2013, the Company acquired a 40% membership interest in Again Faster LLC (“Again Faster”) for a cash price of $4.0 million. On January 31, 2013, the Company acquired a 20% membership interest in Ruckus Sports LLC (“Ruckus”) for a cash price of $1.0 million. Again Faster and Ruckus provide a wide variety of fitness and athletic products and services.

In February 2013, the Company made an extra principal payment of $10.0 million on its term loan with Wells Fargo. See Note 11 for additional details.

In November 2012, the Company purchased $11.9 million face amount of 3.75% Unsecured Convertible Subordinated Debentures Due 2026 in School Specialty Inc., a market leader in school supplies and educational materials (“School Specialties”), at a total cost of $6.0 million. On January 28, 2013, School Specialties filed a Chapter 11 bankruptcy petition. Subsequently, on February 26, 2013, the Company committed to participate, with a share in the amount of approximately $22.0 million, in a $155.0 million debtor-in-possession loan to School Specialties. The Company believes the loan, in conjunction with other sources of financing, will ~~terminate effective September 30, 2010. In connection with her termination, Ms. Dotz will receive: (1) a lump-sum severance payment equal~~enable School Specialties to nine months of her base pay, less applicable taxes and withholdings; (2) a targeted bonus payment equal to $169,000, less applicable taxes and withholdings; (3) reimbursement of COBRA benefit payments until June 30, 2011; and (4) outplacement services valued at up to $5,000. These terms are consistent with Ms. Dotz’s employment agreement and were offered in consideration of Ms. Dotz’s agreement tosuccessfully execute a ~~release in favor~~plan of ADPT. In addition, on June 9, 2010, the Committee agreed to provide a service-based retention award of $75,000 to Ms. Dotz to ensure a smooth transition, contingent on Ms. Dotz continuing as our employee through September 30, 2010.

~~Executive Compensation Tables~~

~~Summary Compensation Table~~

reorganization or other alternative transaction.

The following table ~~provides information with respect~~summarizes the Company’s quarterly financial data, which included reclassifications made to prior period reported amounts to conform to the ~~compensation earned~~current period presentation and to reflect discontinued operations:

The following table includes the activity in the Company’s valuation and qualifying accounts for the fiscal years ~~2008, 2009~~ended December 31, 2012 and ~~2010 by our former CEO, our CFO,~~2011, and ~~our two other highest paid executive officers who were serving as executive officers during fiscal 2010. The table also includes information regarding~~ the ~~compensation paid to our Interim President and CEO during fiscal 2010 for serving in such capacity. We refer to these five executive officers as our “named executive officers.”~~

Name and Principal
Position
Fiscal
Year Salary
($) Bonus
($) Stock
Awards
($)⁽¹⁾ Option
Awards
($)⁽¹⁾ Non-
Equity
Incentive
Plan
Compen-
sation
($)⁽²⁾ Change in
Pension
Value and
Non-
qualified
Deferred
Compen-
sation
Earnings
($) All
Other
Compen-
sation
($)⁽³⁾ Total
($)
Subramanian“Sundi” Sundaresh
Former President and
Chief Executive
Officer⁽⁴⁾
2010
2009
2008
$
$
$
323,000
450,000
450,000
⁽⁵⁾


$
$
$
—
—
—


$
$
$ 476,325
283,425
699,800 $
$
$
346,260
205,712
—
$
$
$
—
190,000
303,075



$
$
$
—
—
29,927
$
$
$
523,399
29,223
26,976
⁽⁶⁾


$
$
$
1,668,984
1,158,360
1,509,778
John J. Quicke
Interim President and
Chief Executive
Officer⁽⁷⁾
2010 $ 90,000    $ — $ — $ — $
—

$ — $ —    $ 90,000
Mary L. Dotz
Vice President and Chief Financial Officer
2010
2009
2008
$
$
$
272,000
265,000
1,020
⁽⁵⁾


$
$
$
—
50,000
—

⁽⁸⁾

$
$
$
464,595
94,475
146,950
$
$
$
161,588
64,285
121,725
$
$
$
34,000
85,000
—



$
$
$
—
—
—
$
$
$
17,889
13,485
49



$
$
$
950,072
572,245
269,744
Marcus D. Lowe
Former Vice President of Marketing and Business Development⁽⁹⁾
2010
2009
2008
$
$
$
216,000
260,000
260,000
⁽⁵⁾


$
$
$
—
—
130,000


⁽¹⁰⁾
$
$
$
150,045
75,580
244,930
$
$
$
115,420
51,428
—
$
$
$
12,000
72,000
56,000




$
$
$
—
—
—
$
$
$
442,650
21,404
22,738


⁽¹¹⁾
$
$
$
936,115
480,412
713,668
John Noellert
Former Vice President of Worldwide Sales⁽¹²⁾
2010
2009
2008
$
$
$
133,000
217,000
211,700
⁽⁵⁾


$
$
$
—
—
103,333


⁽¹⁰⁾
$
$
$
196,478
94,475
174,950
$
$
$
138,504
64,285
—
$
$
$
49,440
77,800
71,300
⁽¹³⁾
⁽¹³⁾
⁽¹³⁾
$
$
$
—
—
—
$
$
$
348,411
20,975
21,870
⁽¹⁴⁾


$
$
$
865,833
474,535
583,153

nine-month transition period ended December 31, 2010:

Delaware
~~Delaware~~		94-2748530
(State ~~or Other Jurisdiction~~ of ~~Incorporation or Organization)~~	Incorporation)	(I.R.S. Employer Identification Number)

Securities registered pursuant to Section 12(g) of the Act:
~~Title of each class~~		~~Name of each exchange on which registered~~
Common Stock, $.001 ~~Par Value~~par value
	~~The NASDAQ Global Market~~Preferred Stock Purchase Rights

Large accelerated filer £	Accelerated filer S
Non-accelerated filer £ (Do not check if a smaller reporting company	Smaller reporting company £

		Page
PART I
Item 1.	Business	1
Item 1A.	Risk Factors	4
Item 1B.	Unresolved Staff Comments	9
Item 2.	Properties	9
Item 3.	Legal Proceedings	9
Item 4.	Mine Safety Disclosures	9
			~~Page~~
~~Part III~~PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	10
Item 6.	Selected Financial Data	11
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 8.	Financial Statements and Supplementary Data	24
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosures	24
Item 9A.	Controls and Procedures	24
Item 9B.	Other Information	24

PART III
Item 10.		Directors, Executive Officers and Corporate Governance	125
Item 11.		Executive Compensation	425
Item 12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	2825
Item 13.		Certain Relationships and Related Transactions, and Director Independence	3125
Item 14.		Principal Accounting Fees and Services	3225
		~~Signatures~~
PART IV		34


~~Name~~ Item 15.	Exhibits, Financial Statement Schedule	25
		~~Age~~
	~~Principal Occupation~~
~~John J. Quicke~~ Signatures		60	~~Interim President and Chief Executive Officer of ADPT; Director of ADPT; and Managing Director and operating partner of Steel Partners LLC~~
~~Mary L. Dotz~~		52	~~Chief Financial Officer of ADPT~~
~~Jon S. Castor~~⁽¹⁾⁽²⁾		58	~~Director of ADPT and Private Investor~~
~~Jack L. Howard~~⁽²⁾⁽³⁾		48	~~Director of ADPT and President of Steel Partners LLC~~
~~John Mutch~~^(1)(2)(3)		53	~~Director of ADPT and Managing Partner of MV Advisors LLC~~
~~Lawrence J. Ruisi~~⁽¹⁾⁽³⁾		62	~~Director of ADPT and Private Investor/Consultant~~26

	·	retaining and attracting key employees;
	·	retaining and attracting new customers;
	·	increased administrative burden;
	·	developing our sales and marketing capabilities;
	·	managing our growth effectively;
	·	integrating operations;
	·	operating a new line of business; and
	·	increased logistical problems common to large, expansive operations.

	·	registration as an investment company;
	·	adoption of a specific form of corporate structure; and
	·	reporting, record keeping, voting, proxy and disclosure requirements and other rules and regulations.

	·	adjustments to estimated taxes upon finalization of various tax returns;
	·	changes in available tax credits;
	·	changes in share-based compensation expense;
	·	changes in tax laws, the interpretation of tax laws either in the United States, Singapore or other foreign taxing jurisdictions or the issuance of new interpretative accounting guidance related to uncertain transactions and calculations where the tax treatment was previously uncertain; and
	·	the resolution of issues arising from tax audits with various tax authorities.

	·	curtailment of services;
	·	weather-related damage to facilities and equipment, resulting in suspension of operations;
	·	inability to deliver equipment, personnel and products; and
	·	increased downtime and loss of productivity.

Fiscal Year Ended December 31, 2012	High		Low

Three-month period ended March 31, 2012	$	28.50	$	23.97
Three-month period ended June 30, 2012	$	28.49	$	25.25
Three-month period ended September 29, 2012	$	27.52	$	24.90
Three-month period ended December 31, 2012	$	25.51	$	23.25


Fiscal Year Ended December 31, 2011	High		Low

Three-month period ended April 1, 2011	$	30.40	$	28.00
Three-month period ended July 1, 2011	$	30.40	$	27.90
Three-month period ended September 30, 2011	$	30.10	$	26.20
Three-month period ended December 31, 2011	$	26.90	$	22.70

	(a)		(b)		(c)		(d)
Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs

Month of October 2012		-	$	-		-		-

Month of November 2012		30,423	$	24.76		-		169,577

Month of December 2012		81,400	$	24.85		-		88,177

Total		111,823	$	24.82		-

	Fiscal Year Ended December 31,					Nine-Month Period Ended December 31,			Fiscal Year Ended March 31,
	2012(8)			2011(2)		2010(3)(4)			2010(3)(5)			2009(3)(6)
	(in thousands, except per share amounts)
Consolidated Statements of Operations Data(1):
Net revenues	$	100,104		$	2,502	$	-		$	-		$	-
Cost of revenues	$	66,064		$	1,459	$	-		$	-		$	-
Gross margin	$	34,040		$	1,043	$	-		$	-		$	-
Total operating expenses	$	28,223		$	9,554	$	14,989		$	30,535		$	29,653
Income (loss) from continuing operations, net of taxes	$	22,179		$	68	$	(17,386	)	$	(17,232	)	$	(6,499	)
Income (loss) from discontinued operations, net of taxes attributable to Steel Excel	$	(1,508	)	$	1,696	$	(11,289	)	$	(1,438	)	$	(8,418	)
Gain on disposal of discontinued operations, net of taxes attributable to Steel Excel	$	-		$	5,005	$	10,916		$	1,236		$	4,727
Net income (loss) attributable to Steel Excel Inc.	$	20,693		$	6,769	$	(17,759	)	$	(17,434	)	$	(10,190	)

Income (Loss) Per Share Data:
Basic
Income (loss) from continuing operations, net of taxes	$	1.83		$	0.01	$	(1.50	)	$	(1.45	)	$	(0.54	)
Income (loss) from discontinued operations, net of taxes	$	(0.16	)	$	0.62	$	(0.03	)	$	(0.02	)	$	(0.31	)
Net income (loss)	$	1.71		$	0.62	$	(1.53	)	$	(1.46	)	$	(0.85	)
Diluted
Income (loss) from continuing operations, net of taxes	$	1.83		$	0.01	$	(1.50	)	$	(1.45	)	$	(0.54	)
Income (loss) from discontinued operations, net of taxes	$	(0.16	)	$	0.61	$	(0.03	)	$	(0.02	)	$	(0.31	)
Net income (loss)	$	1.71		$	0.62	$	(1.53	)	$	(1.46	)	$	(0.85	)
Shares used in computing income (loss) per share
Basic		12,110			10,882		11,609			11,920			11,977
Diluted		12,133			10,897		11,609			11,920			11,977

	December 31,						March 31,
		2012		2011		2010(3)		2010(4)		2009(5)
	(in thousands, except per share amounts)
Consolidated Balance Sheets Data:
Cash, cash equivalents and marketable securities(7)	$	270,684	$	323,428	$	352,411	$	375,347	$	376,592
Restricted cash and/or marketable securities	$	-	$	-	$	1,676	$	-	$	-
Total assets	$	466,495	$	368,677	$	367,552	$	429,076	$	450,107
Long-term liabilities(7)	$	19,155	$	10,767	$	13,189	$	9,568	$	14,974
Stockholders' equity	$	431,901	$	351,469	$	346,266	$	397,703	$	410,880
Working capital(7)	$	276,233	$	324,130	$	356,797	$	377,035	$	385,219

	(2)	The income from discontinued operations, net of taxes, for fiscal 2011 includes the release of a $5.0 million purchase price holdback related to the sales of our DPS Business to PMC-Sierra and the sale of $1.9 million of patents related to our DPS Business.
	(3)	We recorded restructuring charges in the Transition Period and fiscal years 2010 and 2009 of $3.9 million, $1.1 million, and $3.5 million, respectively.
	(4)	In the Transition Period, we (i) recorded stock-based compensation expense of $0.5 million and cash compensation expense of $1.2 million, which primarily reflected the acceleration of unvested stock-based awards and a settlement of unvested stock-based awards in the form of a fixed cash payment, respectively, based on the modifications to such awards approved by our Compensation Committee of the Board of Directors, (ii) changed the remaining useful life of our intangible assets to reflect the pattern in which the economic benefits of the assets were expected to be realized, which materially impacted the amounts amortized, (iii) recorded an impairment charge of $10.2 million related to our long-lived assets that is included in “Loss from discontinued operations, net of taxes” (see Note 8 to the Consolidated Financial Statements) and (iv) recorded a gain of $10.7 million on the sale of the DPS Business (see Note 5 to the Consolidated Financial Statements).

	(5)	In fiscal 2010, we (i) recorded stock-based compensation expense of $3.6 million, which included modifications of certain stock-based awards primarily related to our former Chief Executive Officer, resulting in a charge of $0.9 million, (ii) received $0.9 million as part of a class action suit, (iii) received $0.4 million from the sale of an investment in a non-controlling interest of a non-public company and (iv) recorded an additional gain of $1.2 million on the sale of the Snap Server NAS business.
	(6)	In fiscal 2009, we (i) recorded an impairment charge of $16.9 million to write off goodwill, (ii) recorded stock-based compensation of $1.8 million, (iii) recorded a gain of $2.3 million on the sale of marketable equity securities, (iv) recorded a gain of $1.7 million on the repurchase of our 3/4% Convertible Senior Notes due 2023, or 3/4% Notes, on the open market, (v) recorded a gain of $4.6 million on the sale of the Snap Server NAS business and (vi) recorded a tax benefit arising from the resolution of tax disputes and the adjustment of taxes due in a prior period.
	(7)	In the Transition Period, we sold the DPS Business to PMC-Sierra and received $29.3 million upon the closing of the transaction. In fiscal 2009, we utilized cash to pay off substantially all of the debt associated with the 3/4% Notes, in the amount of $222.9 million. In addition, we paid approximately $38.0 million to acquire Aristos in fiscal 2009.
	(8)	We recorded a benefit from income taxes of $15.7 million for the year ended December 31, 2012, primarily due to the release of a portion of our valuation allowance and a refund received as a result of a tax settlement in Singapore.

	Payments Due By Period
	Total		Less than 1 year		1-3 Years		3-5 Years		More than 5 Years
	(in thousands)

Short-term debt(1)	$	346	$	346	$	-	$	-	$	-
Operating lease obligations(2)		1,990		509		1,444		37		-
Capital lease obligations(3)		1,550		490		1,060		-		-
Tax obligations(4)		7,340		-		7,340		-		-
Long-term debt(5)		13,000		4,000		9,000		-		-
Total	$	24,226	$	5,345	$	18,844	$	37	$	-

(1)	Short-term debt includes anticipated interest payments on our ¾% Notes that are not recorded on our Consolidated Balance Sheet. As we will seek to make open market repurchases of the remaining balance of our ¾% Notes within the next 12 months, we have continued to classify the ¾% Notes as short-term obligations, due in less than one year. Any future repurchases of our ¾% Notes would reduce anticipated interest and/or principal payments
(2)	Operating lease obligations relate to facility leases.
(3)	Capital lease obligations related to two rigs and a Caterpillar payloader acquired through Sun Well.
(4)	Tax obligations relate to liabilities for uncertain tax positions, which were reflected in “Other long-term liabilities.” The timing of any payments that could result from the unrecognized tax benefits will depend on a number of factors. Management believes that it is not reasonably possible that the net unrecognized benefits will change significantly within the next 12 months. For the purposes of this table, we have disclosed the gross unrecognized tax benefits in the “one to three years” column based on our estimate of the timing of payment for the remaining tax obligations.
(5)	Long-term debt relates to a term loan acquired through Sun Well.

	Steel Sports		Steel Energy
	(in years)

Buildings, improvements and sports fields		10-25		7-39
Rigs and workover equipment		N/A		7-15
Other equipment		5-10		4-7
Vehicles		N/A		4-7
Furniture and fixtures		5		5

	Page

Report of Independent Registered Public Accounting Firm	F-1
Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	F-2
Report of Predecessor Independent Registered Public Accounting Firm	F-3
Consolidated Statements of Operations for the fiscal years ended December 31, 2012 and 2011, and the nine-month transition period ended December 31, 2010	F-4
Consolidated Statement of Comprehensive Income (Loss) for the fiscal years ended December 31, 2012 and 2011, and the nine-month transition period ended December 31, 2010	F-5
Consolidated Balance Sheets as of December 31, 2012 and 2011	F-6
Consolidated Statement of Stockholders’ Equity for the fiscal years December 31, 2012 and 2011, and the nine-month transition period ended December 31, 2010	F-7
Consolidated Statements of Cash Flows for the fiscal years ended December 31, 2012 and 2011, and the nine-month transition period ended December 31, 2010	F-8
Notes to Consolidated Financial Statements	F-9

	Fiscal Year Ended December 31,						Nine-Month Fiscal Year Ended December 31,
	2012			2011			2010
Net revenues	$	100,104		$	2,502		$	-

Cost of revenues		66,064			1,459			-
Gross margin		34,040			1,043			-

Operating expenses
Selling, general and administrative		28,031			9,585			11,045
Impairment of goodwill		192			-			-
Restructuring charges		-			(31	)		3,944
Total operating expenses		28,223			9,554			14,989

Operating income (loss)		5,817			(8,511	)		(14,989	)

Interest and other income, net		1,067			8,358			5,208
Interest expense		(417	)		(5	)		(3	)
Income (loss) from continuing operations before income taxes		6,467			(158	)		(9,784	)

Benefit from (provision for) income taxes		15,712			226			(7,602	)
Income (loss) from continuing operations, net of taxes		22,179			68			(17,386	)

Income (loss) from discontinued operations, net of taxes		(1,935	)		1,624			(11,289	)
Gain on disposal of discontinued operations, net of taxes		-			5,005			10,916
Income (loss) from discontinued operations		(1,935	)		6,629			(373	)
Net income (loss)		20,244			6,697			(17,759	)

Net loss attributable to non-controlling interests in consolidated entities
Continuing operations		(22	)		-			-
Discontinued operations		(427	)		(72	)		-
		(449	)		(72	)		-
Net income (loss) attributable to Steel Excel Inc.	$	20,693		$	6,769		$	(17,759	)

Basic income (loss) per share:
Income (loss) from continuing operations, net of taxes	$	1.83		$	0.01		$	(1.50	)
Income (loss) from discontinued operations, net of taxes	$	(0.16	)	$	0.61		$	(0.03	)
Net income (loss) attributable to Steel Excel Inc.	$	1.71		$	0.62		$	(1.53	)

Diluted income (loss) per share:
Income (loss) from continuing operations, net of taxes	$	1.83		$	0.01		$	(1.50	)
Income (loss) from discontinued operations, net of taxes	$	(0.16	)	$	0.61		$	(0.03	)
Net income (loss) attributable to Steel Excel Inc.	$	1.71		$	0.62		$	(1.53	)

Shares used in computing income (loss) per share:
Basic		12,110			10,882			11,609
Diluted		12,133			10,897			11,609

	Fiscal Year Ended December 31, 2012			Nine-Month Fiscal Year Ended December 31, 2011			Transition Period Ended December 31, 2010

Net income (loss) attributable to Steel Excel Inc.	$	20,693		$	6,769		$	(17,759	)
Other comprehensive income (loss), net of taxes
Net foreign currency translation adjustment, net of taxes:
Foreign currency translation adjustment, net of taxes		(100	)		164			141
Release of foreign currency translation gains, net of taxes		-			(2,542	)		-
Subtotal		(100	)		(2,378	)		141
Net unrealized gain (loss) on marketable securities, net of taxes		303			260			(1,566	)

Comprehensive income		20,896			4,651			(19,184	)
Comprehensive loss attributable to non-controlling interest		(449	)		(72	)		-

Comprehensive income (loss) attributable to Steel Excel Inc.	$	20,447		$	4,579		$	(19,184	)

	Common Stock						Additional Paid-in			Accumulated Other Comprehensive			Retained			Non- controlling
	Shares			Amount			Capital			Income			Earnings			Interest			Total

Balance, March 31, 2010		12,040		$	12		$	203,336		$	4,286		$	190,069		$	-		$	397,703
Net loss attributable to Steel Excel Inc.		-			-			-			-			(17,759	)		-			(17,759	)
Other comprehensive loss		-			-			-			(1,425	)		-			-			(1,425	)
Sale of common stock under employee option plans		76			-			2,169			-			-			-			2,169
Net issuance of restricted shares		(62	)		-			-			-			-			-			-
Net settlement of restricted shares		1			-			(861	)		-			-			-			(861	)
Stock-based compensation		-			-			1,123			-			-			-			1,123
Repurchase of common stock		(1,173	)		(1	)		(34,683	)		-			-			-			(34,684	)
Balance, December 31, 2010		10,882			11			171,084			2,861			172,310			-			346,266
Net income attributable to Steel Excel Inc.		-			-			-			-			6,769			-			6,769
Net loss attributable to non-controlling interest		-			-			-			-			-			(72	)		(72	)
Other comprehensive loss											(2,118	)		-			-			(2,118	)
Sale of common stock under employee option plans		1			-			29						-			-			29
Net issuance of restricted shares		5			-									-			-			-
Net settlement of restricted shares		4			-									-			-			-
Stock-based compensation		-			-			523						-			-			523
Non-controlling interest investment														-			500			500
Balance, December 31, 2011		10,892			11			171,636			743			179,079			428			351,897
Net income attributable to Steel Excel Inc.		-			-			-			-	��		20,693			-			20,693
Net loss attributable to non-controlling interest		-			-			-			-			-			(449	)		(449	)
Non-controlling interest investment in The Show																	75			75
Other comprehensive income		-			-			-			203			-			-			203
Net issuance of restricted shares		85			-			-			-			-			-			-
Net settlement of restricted shares		14			-			-			-			-			-			-
Stock-based compensation		-			-			1,487			-			-			-			1,487
Issuance of common stock for acquisition		2,027			2			60,823			-			-			-			60,825
Repurchase of common stock		(111	)		-			(2,776	)		-			-			-			(2,776	)
Non-controlling interest investment in CrossFit		-			-			-			-			-			82			82
Write-off of non-controlling interest of The Show		-			-			-			-			-			(75	)		(75	)

Balance, December 31, 2012		12,907		$	13		$	231,170		$	946		$	199,772		$	61		$	431,962

	Fiscal Year Ended December 31, 2012			Fiscal Year Ended December 31, 2011			Nine-Month Transition Period Ended December 31, 2010
Cash Flows From Operating Activities:
Net income (loss)	$	20,693		$	6,769		$	(17,759	)
Less: Income (loss) from discontinued operations, net of taxes		(1,935	)		6,915			(373	)
Income (loss) from continuing operations, net of taxes		22,628			(146	)		(17,386	)
Adjustments to reconcile income (loss) from continuing operations, net of taxes, to net cash provided by (used in) operating activities of continuing operations:
Stock-based compensation expense		1,487			523			470
Depreciation and amortization		16,728			2,809			3,214
Adjustment of deferred taxes		(15,105	)		1,395			-
Loss on disposal of long-lived assets		819			-			-
Impairment of goodwill		192			-			-
Gain on release of foreign currency translation, net of taxes		-			(2,542	)		-
Changes in current assets and liabilities:
Accounts receivable		(5,469	)		(569	)		-
Prepaid expenses and other current assets		(970	)		2,835			6,554
Assets held for sale		-			6,216			-
Other assets		(132	)		(802	)		153
Accounts payable		1,903			177			(7,120	)
Accrued expenses and other liabilities		(2,098	)		(5,934	)		(6,717	)
Net loss attributable to non-controlling interest		(449	)		(72	)		-
Net cash provided by (used in) operating activities of continuing operations		19,534			3,890			(20,832	)
Net cash provided by (used in) operating activities of discontinued operations		(847	)		6,933			6,519
Net cash provided by (used in) operating activities		18,687			10,823			(14,313	)

Cash Flows From Investing Activities:
Purchases of net assets in acquisitions		(52,567	)		(36,530	)		-
Purchases of property and equipment		(11,818	)		(65	)		-
Investment by non-controlling interest		75			-			-
Purchases of marketable securities		(523,443	)		(537,898	)		(198,403	)
Sales of marketable securities		573,792			441,226			141,681
Maturities of marketable securities		64,253			92,321			49,536
Net cash provided by (used in) investing activities of continuing operations		50,292			(40,946	)		(7,186	)
Net cash provided by investing activities of discontinued operations		-			-			28,285
Net cash provided by (used in) investing activities		50,292			(40,946	)		21,099

Cash Flows From Financing Activities:
Proceeds from issuance of common stock		-			29			2,169
Repurchases of common stock		(2,776	)		-			(34,684	)
Repayments of capital lease obligations		(230	)		-			-
Repayments of long-term debt		(3,000	)		-			-
Net cash provided by (used in) financing activities		(6,006	)		29			(32,515	)
Effect of foreign currency translation on cash and cash equivalents		96			305			57

Net increase (decrease) in cash and cash equivalents		63,069			(29,789	)		(25,672	)
Cash and cash equivalents, beginning balance		8,487			38,276			63,948

Cash and cash equivalents, ending balance	$	71,556		$	8,487		$	38,276

	Amount
	(in thousands)

Inventory	$	53
Property and equipment		151
Total identifiable net assets acquired		204

Non-controlling interest in The Show		(500	)
Goodwill		1,796

Net assets acquired	$	1,500

	Amount
	(in thousands)

Cash	$	3,561
Accounts receivable		7,233
Prepaid expense and other current assets		782
Property and equipment		29,787
Identifiable intangible assets		27,300
Other long-term assets		714
Accounts payable		(1,036	)
Accrued expenses and other current liabilities		(3,464	)
Long-term debt		(16,000	)
Capital lease obligations		(1,622	)
Deferred tax liabilities		(15,066	)
Total net identifiable assets		32,189

Goodwill		36,557

Net assets acquired	$	68,746

	For the Year Ended December 31, 2012			For the Year Ended December 31, 2011
	(unaudited)
	(in thousands)

Net revenues	$	123,876		$	82,755
Income from continuing operations, net of taxes	$	24,997		$	8,347
Income (loss) from discontinued operations, net of taxes	$	(1,935	)	$	6,275
Net income attributable to Steel Excel Inc.	$	23,511		$	14,712

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(in thousands, except exercise price and contractual terms)

Outstanding at March 31, 2010		488		$	40.50
Granted		9		$	29.30
Exercised		(76	)	$	28.50
Forfeited		-		$	38.70
Expired		(341	)	$	44.00
Outstanding at December 31, 2010		80		$	35.61
Granted		28		$	28.73
Exercised		(1	)	$	28.60
Forfeited		(1	)	$	28.40
Expired		(12	)	$	48.32
Outstanding at December 31, 2011		94		$	31.89
Granted		3		$	13.32
Exercised		-		$	-
Forfeited		(5	)	$	37.60
Expired		(27	)	$	46.16
Outstanding at December 31, 2012		65		$	30.93		7.76	$	-

Options vested and expected to vest at
December 31, 2012		65		$	30.93		7.76	$	-

Options exercisable at:
December 31, 2010		69		$	36.60
December 31, 2011		68		$	33.12
December 31, 2012		46		$	31.98		7.21	$	-

			Options Outstanding						Options Exercisable
Range of Exercise Prices			Number Outstanding		Weighted Average Remaining Contractual Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Exercise Price
			(in thousands, except exercise price and contractual life)

$25.00	-	$30.00		45		8.56	$	28.67		26	$	28.88
$30.01	-	$35.00		15		6.42	$	32.84		12	$	32.84
$35.01	-	$40.00		-		-	$	-		-	$	-
$40.01	-	$45.00		5		5.19	$	40.72		8	$	40.72
				65						46

	Shares			Weighted Average Grant Date Fair Value
	(in thousands)

Non-vested stock at March 31, 2010		172		$	30.10
Awarded		8		$	29.30
Vested		(45	)	$	32.80
Forfeited		(127	)	$	29.10
Non-vested stock at December 31, 2010		8		$	29.40
Awarded		17		$	37.61
Vested		(10	)	$	28.97
Forfeited		-		$	28.39
Non-vested stock at December 31, 2011		15		$	29.40
Awarded		100		$	27.34
Vested		(12	)	$	29.09
Forfeited		-		$	-
Non-vested stock at December 31, 2012		103		$	23.34


Name	Role	Annual Base Salary⁽¹⁾		Annual Target % of Annual Base Salary⁽²⁾		Annual Achieved % of Annual Base Salary		Total Cash Bonus Incentive
Subramanian “Sundi” Sundaresh⁽³⁾	Former President and Chief Executive Officer	$	450,000	85	%	0	%	$	—
John J. Quicke⁽⁴⁾	Interim President and Chief Executive Officer		N/A	N/A		N/A			N/A
Mary L. Dotz	Vice President and Chief Financial Officer	$	295,000	50	%	11.5	%	$	34,000
Marcus D. Lowe⁽⁵⁾	Former Vice President of Marketing and Business Development	$	240,000	50	%	10.0	%	$	12,000
John Noellert⁽⁶⁾	Former Vice President of World Wide Sales	$	217,000	N/A		N/A			N/A


Name	Role	April 2009 (FY’10) Performance Contingent Stock Grant (Shares)	August 2009 (FY’10) Option Grant (Shares)	August 2009 (FY’10) Performance Contingent Stock Grant (Shares)	December 2009 (FY’10) Performance Contingent Stock Grant Payable in Cash (Shares)
Subramanian “Sundi” Sundaresh	Former President and Chief Executive Officer	100,000	300,000	75,000	—
John J. Quicke⁽¹⁾	Interim President and Chief Executive Officer	N/A	N/A	N/A	N/A
Mary L. Dotz	Vice President and Chief Financial Officer	45,000	140,000	35,000	75,000
Marcus D. Lowe	Former Vice President of Marketing and Business Development	30,000	100,000	25,000	—
John Noellert	Former Vice President of World Wide Sales	45,000	120,000	27,500	—

(1)	The total stock-based compensation, net of taxes, recorded on the Consolidated Statements of Operations and Consolidated Statements of Cash Flows for Transition Period and fiscal 2010, differs from the Consolidated Statements of Stockholders’ Equity as the Consolidated Statements of Stockholders’ Equity includes both continuing and discontinued operations.
(2)	The stock-based compensation recorded in the Transition Period excluded the cash compensation expense of $1.2 million paid to employees related to the settlement of unvested stock-based awards in the form of a fixed cash payment.

	Cost			Gross Unrealized Gains		Gross Unrealized Losses			Estimated Fair Value
	(in thousands)
Available-for-sale securities:
Short-term deposits	$	48,596		$	-	$	-		$	48,596
Mutual funds		10,368			1,452		-			11,820
United States government securities		99,299			178		-			99,477
Corporate securities		20,842			1,255		(1,980	)		20,117
Corporate obligations		48,708			283		(277	)		48,714
Commerical paper		22,275			16		-			22,291
Total available-for-sale securities		250,088			3,184		(2,257	)		251,015
Amounts classified as cash equivalents		(51,887	)		-		-			(51,887	)
Amounts classified as marketable securities	$	198,201		$	3,184	$	(2,257	)	$	199,128

	Less than 12 Months					12 Months or Greater					Total
	Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses			Fair Value		Gross Unrealized Losses
	(in thousands)

U.S. government securities	$	88,420	$	-		$	11,056	$	-		$	99,476	$	-
Corporate oligations		24,346		(2	)		24,370		(272	)		48,716		(274	)
Total	$	112,766	$	(2	)	$	35,426	$	(272	)	$	148,192	$	(274	)

	Cost		Estimated Fair Value
	(in thousands)

Mature in one year or less	$	214,784	$	215,589
Mature after one year through three years		19,550		19,854
Mature in more than three years		15,753		15,572
Total	$	250,087	$	251,015

	Unrealized Gain on Securities		Cumulative Translation Adjustment			Total

Balance at December 31, 2011	$	624	$	119		$	743
Other comprehensive income (loss)		303		(100	)		203

Balance at December 31, 2012	$	927	$	19		$	946