Share-Based Compensation

3 Months Ended

Mar. 31, 2012

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 March 31,
	2012		2011

	(in thousands)
Share-based compensation expense:
Cost of revenues	$	12	$	1
Sales and marketing		92		83
Technology support		91		71
General and administrative		86		72
Share-based compensation costs		281		227

Amount capitalized to internal use software		1		4
Total share-based compensation costs	$	282	$	231

Service-Based Options. During the three months ended March 31, 2012, the Company granted 97,000 service-based stock options with weighted average grant date fair values of $0.48 and weighted average exercise prices of $0.79. During the three months ended March 31, 2011, the Company granted 285,548 service-based stock options with weighted average grant date fair values of $0.62 and weighted average exercise prices of $1.00. 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 three months ended March 31, 2012, the Company granted 1,245,962 performance-based stock options ("2012 Performance Options") to certain employees with a weighted average grant date fair value of $0.48, using a Black-Scholes option pricing model. The 2012 Performance Options are subject to two vesting requirements and conditions: i) percentage achievement of 2012 revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") goals and ii) time vesting.

During the three months ended March 31, 2011, the Company granted 1,248,903 performance-based stock options ("2011 Performance Options") to certain employees with a weighted average grant date fair value of $0.59, using a Black-Scholes option pricing model. The 2011 Performance Options are subject to two vesting requirements and conditions: i) percentage achievement of 2011 revenues and EBITDA goals and ii) time vesting. Based on the Company's 2011 revenues and EBITDA performance, 726,666 of the 2011 Performance Options vested under the performance vesting condition, and one-third of these options vested on the first anniversary of the grant date, with the remainder vesting ratably over twenty-four months thereafter.

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 March 31, 2012 and March 31, 2011, 4,655 and 95,170 of these market condition stock options were exercised, respectively.

During the three months ended March 31, 2012, 8,039 stock options (inclusive of the 4,655 market condition stock options exercised during the period) were exercised, with an aggregate weighted average exercise price of $0.46. There were 351,583 stock options (inclusive of the 95,170 market condition stock options exercised during the period) exercised during the three months ended March 31, 2011 with an aggregate weighted average exercise price of $0.81. 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 March 31,
	2012			2011
Dividend yield		-			-
Volatility		84	%		84	%
Risk-free interest rate		0.7	%		1.61	%
Expected life (years)		4.2			4.1

Warrant. In connection with the acquisition of Auto/Cyber, the Company issued to the sellers a warrant to purchase 2,000,000 shares of Company common stock ("Warrant"). 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. The Warrant was valued based on long-term volatilities of the Company and comparable public companies as of the Acquisition Date. The exercise price of the warrant is $0.93 per share (as adjusted for stock splits, stock dividends, combinations and other similar events). The Warrant becomes exercisable on the third anniversary of the issuance date and expires on the eighth anniversary of the issuance date. The right to exercise the Warrant is accelerated in the event of a change in control of the Company.