Share-Based Compensation

6 Months Ended

Jun. 30, 2013

Share Based Compensation [Abstract]

Share-Based Compensation

5. Share-Based Compensation

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(in thousands)				(in thousands)
Share-based compensation expense:
Cost of revenues	$	12	$	11	$	25	$	23
Sales and marketing		41		71		76		162
Technology support		57		77		116		169
General and administrative		79		61		158		147
Share-based compensation costs		189		220		375		501
Amount capitalized to internal use software		1		2		1		2
Total share-based compensation costs	$	188	$	218	$	374	$	499

Service-Based Options.  During the three months ended June 30, 2013, the Company granted 39,000 service-based stock options with weighted average grant date fair values of $2.27 and weighted average exercise prices of $4.56.  During the three months ended June 30, 2012, the Company granted 22,000 service-based stock options with weighted average grant date fair values of $2.42 and weighted average exercise prices of $4.01.  During the six months ended June 30, 2013, the Company granted 96,000 service-based stock options with weighted average grant date fair values of $2.22 and weighted average exercise prices of $4.23.  During the six months ended June 30, 2012, the Company granted 41,400 service-based stock options with weighted average grant date fair values of $2.42 and weighted average exercise prices of $3.98.  These options are valued using a Black-Scholes option pricing model and 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, 2013, the Company granted 87,177 performance-based stock options ("2013 Performance Options") to certain employees with a weighted average grant date fair value of $2.19, using a Black-Scholes option pricing model and exercise price of $4.00.  The 2013 Performance Options are subject to two vesting requirements and conditions: (i) percentage achievement of 2013 revenues and earnings before interest, taxes, depreciation and amortization ("EBITDA") goals and (ii) time vesting.

AUTOBYTEL INC.

NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS – (continued)

During the six months ended June 30, 2012, the Company granted 249,199 performance-based stock options ("2012 Performance Options") to certain employees with a weighted average grant date fair value of $2.39, using a Black-Scholes option pricing model and exercise price of $3.98.  The 2012 Performance Options are subject to two vesting requirements and conditions: (i) percentage achievement of 2012 revenues and EBITDA goals and (ii) time vesting.  Based on the Company's 2012 revenues and EBITDA performance, 161,394 of the 2012 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 213,650 stock options to substantially all employees at exercise prices equal to the price of the stock on the grant date of $1.75, with a fair market value per option granted of $0.97, 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. During the three months ended June 30, 2013 and June 30, 2012, 1,076 and 4,276 of these market condition stock options were exercised, respectively.  During the six months ended June 30, 2013 and June 30, 2012, 5,076 and 5,206 of these market condition stock options were exercised, respectively.

During the three and six months ended June 30, 2013, 13,738 and 21,738 stock options (inclusive of the 1,076 and 5,076 market condition stock options exercised during the period, respectively) were exercised, with aggregate weighted average exercise prices of $3.77 and $3.27, respectively.  There were 5,138 and 6,744 stock options (inclusive of the 4,276 and 5,206 market condition stock options exercised during the period, respectively) exercised during the three and six months ended June 30, 2012 with aggregate weighted average exercise prices of $1.98 and $2.06, 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 June 30,		Six Months Ended June 30,
	2013	2012	2013	2012
Dividend yield	-	-	-	-
Volatility	64 %	82 %	70 %	84 %
Risk-free interest rate	0.9 %	0.6 %	0.7 %	0.6 %
Expected life (years)	4.3	4.2	4.3	4.2