Share-Based Compensation

9 Months Ended

Sep. 30, 2011

Share-Based Compensation Note [Abstract]

6. 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 September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010

	(in thousands)				(in thousands)
Share-based compensation expense:
Cost of revenues	$	11	$	8	$	23	$	27
Sales and marketing		94		74		275		189
Technology support		89		45		250		109
General and administrative (a)		74		104		229		478
Share-based compensation costs		268		231		777		803

Amount capitalized to internal use software		-		-		9		-
Total share-based compensation costs	$	268	$	231	$	768	$	803

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

Service-Based Options. During the three months ended September 30, 2011, the Company granted 215,000 service-based stock options with weighted average grant date fair values of $0.68 and weighted average exercise prices of $1.10. During the nine months ended September 30, 2011, the Company granted 820,048 service-based stock options with weighted average grant date fair values of $0.69 and weighted average exercise prices of $1.12. During the three months ended September 30, 2010, the Company granted 660,000 service-based stock options with weighted average grant date fair values of $0.53 and weighted average exercise prices of $0.86. During the nine months ended September 30, 2010, the Company granted 1,613,710 service-based stock options with weighted average grant date fair values of $0.60 and weighted average exercise prices of $0.98. 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 nine months ended September 30, 2011, the Company granted 1,276,990 performance-based stock options ("Performance Options") to certain employees with a weighted average grant date fair value of $0.60, 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 September 30, 2011, 5,637 of these market condition stock options were exercised.

During the three and nine months ended September 30, 2011, 38,498 and 425,498 stock options (inclusive of the 5,637 and 113,357 market condition stock options exercised during the period, respectively) were exercised, with an aggregate weighted average exercise price of $0.76 and $0.81, respectively. There were 7,546 and 233,654 options exercised during the three and nine months ended September 30, 2010 with an aggregate weighted average exercise price of $0.82 and $0.46, respectively. 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 September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Dividend yield		-			-			-			-
Volatility		85	%		83	%		84	%		83	%
Risk-free interest rate		1.1	%		2.2	%		1.5	%		2.0	%
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 4 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.