Share-Based Compensation

6 Months Ended

Jun. 30, 2011

Share-Based Compensation Note [Abstract]

5. Share-Based Compensation

Share-based compensation expense is included in costs and expenses in the accompanying Unaudited Consolidated Condensed Statements of Operations and Comprehensive Income (Loss) as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(in thousands)				(in thousands)
Share-based compensation expense:
Cost of revenues	$	11	$	9	$	12	$	18
Sales and marketing		99		55		182		114
Technology support		85		33		160		65
General and administrative (a)		83		233		155		375
Share-based compensation costs		278		330		509		572

Amount capitalized to internal use software		5		-		9		-
Total share-based compensation costs	$	273	$	330	$	500	$	572

(a) Approximately $96,000 of accelerated stock compensation expense is included in the six months ended June 30, 2010 amount. Vesting of these awards accelerated in accordance with the original award agreements.

Service-Based Options. During the three months ended June 30, 2011, the Company granted 319,500 service-based stock options with weighted average grant date fair values of $0.77 and weighted average exercise prices of $1.23. During the six months ended June 30, 2011, the Company granted 605,048 service-based stock options with weighted average grant date fair values of $0.70 and weighted average exercise prices of $1.12. During the three months ended June 30, 2010, the Company granted 648,710 service-based stock options with weighted average grant date fair values of $0.63 and weighted average exercise prices of $1.03. During the six months ended June 30, 2010, the Company granted 871,210 service-based stock options with weighted average grant date fair values of $0.64 and weighted average exercise prices of $1.04. These options generally vest one-third on the first anniversary of the grant date and ratably over twenty-four months thereafter. The vesting of these awards is contingent upon the employee's continued employment with the Company during the vesting period.

Performance-based Options. During the six months ended June 30, 2011, the Company granted 1,259,903 performance-based stock options ("Performance Options") to certain employees with a weighted average grant date fair value of $0.59, using a Black-Scholes option pricing model. The Performance Options are subject to two vesting requirements and conditions: i) percentage achievement of 2011 revenues and earnings before interest, taxes, depreciation and amortization goals and ii) time vesting.

Market Condition Options. In 2009 the Company granted 1,068,250 stock options to substantially all employees at exercise prices equal to the price of the stock on the grant date of $0.35, with a fair market value per option granted of $0.19, using a Black-Scholes option pricing model. One-third of these options cliff vested on the first anniversary following the grant date and the remaining two-thirds vest ratably over twenty-four months thereafter. In addition, the remaining two-thirds of the awards were subject to satisfaction of market price conditions for the Company's common stock, which conditions have been satisfied. Certain of these options will accelerate vesting upon a change in control of the Company. During the three months ended June 30, 2011, 12,550 of these market condition stock options were exercised.

During the three and six months ended June 30, 2011, 35,417 and 387,000 stock options (inclusive of the 12,550 and 107,720 market condition stock options exercised during the period, respectively) were exercised, with an aggregate weighted average exercise price of $0.79 and $0.81, respectively. There were no options exercised during the three months ended March 31, 2010. During the six months ended June 30, 2010, 226,108 stock options were exercised, with an aggregate weighted average exercise price of $0.45. The grant date fair value of stock options granted during these periods was estimated using the Black-Scholes option-pricing model using the following weighted average assumptions:

	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010
Dividend yield		-			-			-			-
Volatility		85	%		83	%		84	%		83	%
Risk-free interest rate		1.5	%		1.7	%		1.6	%		1.8	%
Expected life (years)		4.1			4.1			4.1			4.1

Warrant. In connection with the acquisition of Auto/Cyber, the Company issued to the sellers the Warrant described in Footnote 3 above. The Warrant was valued at $0.63 per share on the Acquisition Date using an option pricing model with the following key assumptions: risk-free rate of 2.3%, stock price volatility of 77.5% and a term of 8.04 years.