Computation of Basic and Diluted Net Earnings Per Share

3 Months Ended

Mar. 31, 2014

Computation of Basic and Diluted Net Income Per Share [Abstract]

Computation of Basic and Diluted Net Earnings Per Share

Basic net earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted net earnings per share is computed using the weighted average number of common shares, and if dilutive, potential common shares outstanding, as determined under the treasury stock and if-converted method, during the period. Potential common shares consist of common shares issuable upon the exercise of stock options, common shares issuable upon the exercise of the warrant described below and common shares issuable upon conversion of the convertible notes described in Note 7.  The following are the share amounts utilized to compute the basic and diluted net income per share for the three months ended March 31, 2014 and 2013:

	Three Months Ended March 31,
	2014		2013
Basic Shares		8,928,400		8,856,289
Weighted average dilutive securities		1,353,938		219,243
Dilutive Shares		10,282,338		9,075,532

For the three months ended March 31, 2014, weighted average dilutive securities included dilutive options and warrants.  For the three months ended March 31, 2013, weighted average dilutive securities included dilutive options.

For the three months ended March 31, 2014, 2.1 million of potentially anti-dilutive shares of common stock have been excluded from the calculation of diluted net income per share.  For the three months ended March 31, 2013, 2.6 million of potentially anti-dilutive shares of common stock have been excluded from the calculation of diluted net income per share.

 On February 13, 2012, the Company announced that the Board of Directors had approved a stock repurchase program that authorized the repurchase of up to $1.5 million of Company common stock.  The Board of Directors authorized the Company to repurchase an additional $2.0 million of Company common stock on June 7, 2012.  Under these repurchase programs, the Company may repurchase common stock from time to time on the open market or in private transactions. This authorization does not require the Company to purchase a specific number of shares, and the Board of Directors may suspend, modify or terminate the programs at any time.  The Company would fund repurchases through the use of available cash. The Company began repurchasing its common stock on March 7, 2012.   No shares have been repurchased since 2012.  Shares repurchased in 2012 were cancelled by the Company and returned to authorized and unissued shares.

Warrant.  On September 17, 2010 (“Cyber Acquisition Date”), the Company acquired substantially all of the assets of privately-held Autotropolis, Inc., a Florida corporation, and Cyber Ventures, Inc., a Florida corporation (collectively referred to in this Quarterly Report on Form 10-Q as “Cyber”).   In connection with the acquisition of Cyber, the Company issued to the sellers a warrant to purchase 400,000 shares of Company common stock (“Cyber Warrant”). The Cyber Warrant was valued at $3.15 per share on the Cyber 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 Cyber Warrant was valued based on historical stock price volatilities of the Company and comparable public companies as of the Cyber Acquisition Date.  The exercise price of the Cyber Warrant is $4.65 per share (as adjusted for stock splits, stock dividends, combinations and other similar events).  The Cyber Warrant became exercisable on September 16, 2013 and expires on the eighth anniversary of the issuance date. The Cyber Warrant has not been exercised as of March 31, 2014.

The AutoUSA Warrant issued related to the acquisition described in Note 4 was valued as of the AutoUSA Acquisition Date at $7.35 per share for a total value of $0.5 million.  The Company used an option pricing model to determine the value of the AutoUSA Warrant.  Key assumptions used in valuing the AutoUSA Warrant are as follows: risk-free rate of 1.6%, stock price volatility of 65.0% and a term of 5.0 years.  The AutoUSA Warrant was valued based on long-term stock price volatilities of the Company.  The exercise price of the AutoUSA Warrant is $14.30 per share (as adjusted for stock splits, stock dividends, combinations and other similar events).  The AutoUSA Warrant becomes exercisable on the third anniversary of the issuance date and expires on the fifth anniversary of the issuance date.  The right to exercise the AutoUSA Warrant is accelerated in the event of a change in control of the Company.