UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 0-26123

ONLINE RESOURCES CORPORATION

Delaware		52-1623052
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)		(I.R.S. EMPLOYER IDENTIFICATION NO.)
4795 Meadow Wood Lane Chantilly, Virginia		20151 (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

(703) 653-3100
(REGISTRANT’S TELEPHONE NUMBER, INCLUDING AREA CODE)

     Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o (Do not check if a smaller reporting company)		Smaller reporting company o

     As of July 31, 2010 there were 31,152,835 shares of the issuer’s common stock outstanding.

 

 

ONLINE RESOURCES CORPORATION

FORM 10-Q

TABLE OF CONTENTS

		Page
PART I FINANCIAL INFORMATION
Item 1: Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets (unaudited) at June 30, 2010 and December 31, 2009			3
Condensed Consolidated Statements of Operations (unaudited) — Three and six months ended June 30, 2010 and 2009			4
Condensed Consolidated Statements of Cash Flows (unaudited) — Six months ended June 30, 2010 and 2009			5
Notes to Condensed Consolidated Financial Statements (unaudited)			6
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations			15
Item 3: Quantitative and Qualitative Disclosures About Market Risk			23
Item 4: Controls and Procedures			24
PART II OTHER INFORMATION
Item 1: Legal Proceedings			25
Item 1A: Risk Factors			25
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds			25
Item 3: Defaults Upon Senior Securities			26
Item 4: Submission of Matters to a Vote of Security Holders			26
Item 5: Other Information			26
Item 6: Exhibits			26
EX-31.1
EX-31.2
EX-32

PART I. FINANCIAL INFORMATION

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

ONLINE RESOURCES CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except par values)

		June 30,				December 31,
		2010				2009
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	21,177			$	22,907
Accounts receivable (net of allowance of $100 in each period)			19,296				17,457
Deferred tax asset, current portion			7,476				7,477
Deferred implementation costs, current portion			2,476				1,941
Prepaid expenses and other current assets			3,214				2,102
Total current assets			53,639				51,884
Property and equipment, net			28,514				25,561
Deferred tax asset, less current portion			19,737				22,490
Goodwill			181,516				181,516
Intangible assets			16,789				19,972
Deferred implementation costs, less current portion, and other assets			8,546				7,067
Total assets		$	308,741			$	308,490
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	2,952			$	2,008
Accrued expenses			5,106				3,739
Notes payable, senior secured debt, current portion			13,063				8,250
Interest payable			3				27
Deferred revenues, current portion and other current liabilities			7,172				6,793
Total current liabilities			28,296				20,817
Notes payable, senior secured debt, less current portion			27,687				40,500
Deferred revenues, less current portion and other long-term liabilities			6,887				6,888
Total liabilities			62,870				68,205
Commitments and contingencies
Redeemable convertible preferred stock:
Series A-1 convertible preferred stock, $0.01 par value; 75 shares authorized and issued at June 30, 2010 and December 31, 2009 (redeemable on July 3, 2013 at $135,815)			105,334				100,623
Stockholders’ equity:
Series B junior participating preferred stock, $0.01 par value; 297.5 shares authorized; none issued		—					—
Common stock, $0.0001 par value; 70,000 shares authorized; 31,489 issued and 31,062 outstanding at June 30, 2010 and 30,439 and 30,112 outstanding at December 31, 2009			3				3
Additional paid-in capital			215,928				213,096
Accumulated deficit			(72,471	)			(70,776	)
Treasury stock, 427 shares at June 30, 2010 and 327 shares at December 31, 2009			(2,923	)			(2,661	)
Total stockholders’ equity			140,537				139,662
Total liabilities and stockholders’ equity		$	308,741			$	308,490

See accompanying notes to condensed consolidated unaudited financial statements.

ONLINE RESOURCES CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
		(Unaudited)								(Unaudited)
Revenues:
Account presentation services		$	2,058			$	1,954			$	4,439			$	3,794
Payment services			28,145				30,027				57,877				61,155
Relationship management services			2,042				2,000				4,140				4,040
Professional services and other			4,114				3,802				8,485				8,034
Total revenues			36,359				37,783				74,941				77,023
Costs and expenses:
Service costs			18,210				18,886				36,711				37,412
Implementation and other costs			1,176				1,130				2,301				2,268
Costs of revenues			19,386				20,016				39,012				39,680
Gross profit			16,973				17,767				35,929				37,343
General and administrative			8,273				6,887				16,028				16,608
Sales and marketing			4,846				5,722				9,757				11,328
Systems and development			2,553				2,131				5,126				4,384
Total expenses			15,672				14,740				30,911				32,320
Income from operations			1,301				3,027				5,018				5,023
Other income (expense):
Interest income			14				36				21				82
Interest expense			224				(1,862	)			164				(2,943	)
Other (expense) income			(1	)			63				(99	)			77
Total other income (expense)			237				(1,763	)			86				(2,784	)
Income before income tax provision			1,538				1,264				5,104				2,239
Income tax provision			469				688				1,855				1,032
Net income			1,069				576				3,249				1,207
Preferred stock accretion			2,374				2,287				4,711				4,536
Net loss available to common stockholders		$	(1,305	)		$	(1,711	)		$	(1,462	)		$	(3,329	)
Net loss available to common stockholders per share:
Basic		$	(0.04	)		$	(0.06	)		$	(0.05	)		$	(0.11	)
Diluted		$	(0.04	)		$	(0.06	)		$	(0.05	)		$	(0.11	)
Shares used in calculation of net loss available to common stockholders per share:
Basic			30,911				29,908				30,699				29,821
Diluted			30,911				29,908				30,699				29,821

See accompanying notes to condensed consolidated unaudited financial statements.

ONLINE RESOURCES CORPORATION

		Six Months Ended June 30,
		2010				2009
		(Unaudited)
Operating activities
Net income		$	3,249			$	1,207
Adjustments to reconcile net income to net cash provided by operating activities:
Deferred tax benefit			2,754				1,019
Depreciation and amortization			9,362				10,409
Equity compensation expense			1,579				2,238
Write off and amortization of debt issuance costs			185				170
Loss on disposal of assets			1				15
Provision for losses on accounts receivable			8				16
Gain on investments			—				(77	)
Change in fair value of theoretical swap derivative			(1,027	)			702
Changes in certain other assets and liabilities			(1,193	)			822
Net cash provided by operating activities			14,918				16,521
Investing activities
Purchases of property and equipment			(9,070	)			(4,457	)
Sale of short-term investments			—				770
Net cash used in investing activities			(9,070	)			(3,687	)
Financing activities
Net proceeds from issuance of common stock			441				366
Repayment of 2007 Notes			(8,000	)			(7,438	)
Repayment of capital lease obligations			(19	)			(16	)
Net cash used in financing activities			(7,578	)			(7,088	)
Net (decrease) increase in cash and cash equivalents			(1,730	)			5,746
Cash and cash equivalents at beginning of year			22,907				22,969
Cash and cash equivalents at end of period		$	21,177			$	28,715

See accompanying notes to condensed consolidated unaudited financial statements.

ONLINE RESOURCES CORPORATION

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION

     Online Resources Corporation (the “Company”) provides outsourced, web- and phone-based financial technology services to financial institution, biller, card issuer and creditor clients and their millions of consumer end-users. End-users may access and view their accounts online and perform various self-service functions. They may also make electronic bill payments and funds transfers, utilizing the Company’s unique, real-time debit architecture, ACH and other payment methods. The Company’s value-added relationship management services reinforce a favorable user experience and drive a profitable and competitive online channel for its clients. Further, the Company provides professional services, including software solutions, which enable various deployment options, a broad range of customization and other value-added services. The Company currently operates in two business segments — Banking and eCommerce.

     INTERIM FINANCIAL INFORMATION

     The accompanying condensed consolidated unaudited financial statements have been prepared in conformity with generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. In the opinion of management, the condensed consolidated unaudited financial statements include all adjustments necessary (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. These condensed consolidated unaudited financial statements should be read in conjunction with the consolidated audited financial statements for the year ended December 31, 2009, included in the Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission (“SEC”) on March 10, 2010. The results of operations for any interim period are not necessarily indicative of the results of operations for any other interim period or for a full fiscal year. Certain amounts from prior periods have been reclassified to conform to current period presentation. The Company has evaluated all subsequent events through the date the financial statements were issued.

     NEW ACCOUNTING STANDARDS

     In February of 2010, the FASB amended its guidance for disclosing subsequent events. The revised guidance removes the requirement of disclosing the date through which subsequent events are evaluated and requires evaluation of subsequent events through the date that the financial statements are issued. Adoption of this guidance in the first quarter of 2010 did not impact the Company’s consolidated financial statements.

     In January of 2010, the FASB improved its disclosures for fair value measurements, requiring separate disclosures of transfers in and out of Level 1 and Level 2 fair value measurements along with the reason for the transfer. The new guidance also requires separately presenting the reconciliation for Level 3 fair value measurements purchases, sales, issuances and settlements and clarifies the disclosure regarding the level of disaggregation and input and valuation techniques. The guidance related to the Level 3 reconciliation will be effective January 1, 2011. The remaining guidance was adopted during the first quarter of 2010. Adoption of this guidance in the first quarter of 2010 did not materially impact the Company’s consolidated financial statements and financial disclosures.

     In October 2009, the FASB changed its guidance for the accounting of certain revenue arrangements that include software elements. This authoritative guidance amends the scope of pre-existing software revenue guidance by removing from the guidance non-software components of tangible products and certain software components of tangible products. The Company has adopted this authoritative guidance prospectively in the first quarter of 2010. The implementation currently has no impact on the Company’s consolidated financial statements. This guidance will be assessed on an ongoing basis to determine if any new contracts are subject to these new rules.

     In October 2009, the FASB changed its guidance for the accounting of multiple-deliverable revenue arrangements with customers. Current GAAP requires a vendor to use vendor-specific objective evidence or third-party evidence of selling price to separate deliverables in a multiple-deliverable arrangement. Multiple-deliverable arrangements will be separated in more circumstances with the updated guidance. The change in guidance establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific nor third-party evidence is available. The best estimate to use in determining a selling price is the price as if the item were sold on a stand alone basis. Changes also include eliminating the residual method of allocation and requiring that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates discounts in the arrangement proportionally to each deliverable based on each selling price. These changes become effective, prospectively, for the Company on January 1, 2011 and early adoption is permitted. The Company has not determined the impact, if any, implementation of this guidance will have on the Company’s consolidated financial statements.

     In April 2009, the FASB issued guidance for determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly. Additionally, entities are required to disclose in interim and annual periods the inputs and valuation techniques used to measure fair value. This guidance became effective for the Company and was adopted on July 1, 2009. As the requirements under this guidance are consistent with our current practice, adoption did not have a material impact on the Company’s consolidated financial statements or financial disclosures.

2. SENIOR SECURED NOTES

     The Company has an agreement with Bank of America which finances its senior secured notes (“2007 Notes”). The agreement also provides a $15 million revolver (“Revolver”) under which the Company can secure up to $5 million in letters of credit. Currently, there are no amounts outstanding under the Revolver, but available credit under the Revolver has been reduced by approximately $1.6 million as a result of letters of credit the bank has issued. The Company has made payments of $8.0 million on the 2007 Notes in the six months ended June 30, 2010, reducing the outstanding principal from $48.8 million to $40.8 million. The Company will make periodic principal payments until the 2007 Notes are due in 2012 as noted in the table below.

     The interest rate on both the Revolver and the 2007 Notes is the one-month London Interbank Offered Rate (“LIBOR”) plus 225 to 275 basis points based upon the ratio of the Company’s funded indebtedness to its earnings before interest, taxes, depreciation and amortization (“EBITDA,” as defined in the 2007 Notes), and it is payable monthly. During the six months ended June 30, 2010 the margin decreased from 250 basis points to 225 basis points and the average interest rate was 2.65%. The 2007 Notes and the Revolver are secured by the assets of the Company.

     During the second quarter of 2010, the Company made a voluntary $4 million prepayment against the notes and amended future payments. The Company expensed less than $0.1 million of deferred credit facility costs related to this prepayment.

     Maturities of long-term debt for each of the next 20 months are as follows (in thousands):

		Maturing
Year		Amounts
2010 (July 1, 2010-December 31, 2010)		$	3,000
2011		$	28,188
2012		$	9,562

3. DERIVATIVE INSTRUMENTS

     Theoretical Swap Derivative

     The Company bifurcated the fair market value of the embedded derivative associated with the Series A-1 Redeemable Convertible Preferred Stock (“Series A-1 Preferred Stock”) issued in conjunction with the Princeton eCom acquisition on July 3, 2006 as required by GAAP. The Company determined that the embedded derivative is defined as the right to receive a fixed rate of return on the accrued, but unpaid dividends and the variable negotiated rate, which creates a theoretical swap between the fixed rate of return on the accrued, but unpaid dividends and the variable rate actually accrued on the unpaid dividends. This embedded derivative is marked to market at the end of each reporting period through earnings and an adjustment to other assets as required by the Derivative and Hedging Topic. There is no active market quote available for the fair value of the embedded derivative. Thus, management measures fair value of the derivative by estimating future cash flows related to the asset using a forecasted iMoney Net First Tier rate based on the one-month LIBOR rate adjusted for the historical spread for the estimated period in which the Series A-1 Preferred Stock will be outstanding.

     The following table presents the fair value of the theoretical swap derivative instrument included within the condensed consolidated balance sheet at June 30, 2010 and December 31, 2009 (in thousands):

Balance Sheet

June 30, 2010

December 31, 2009

Location

Asset Derivatives:

Theoretical swap (1)

$

5,695

$

4,668

Other assets

     The following table presents the amounts affecting the condensed consolidated statement of operations for the three and six months ended June 30, 2010 and June 30, 2009 (in thousands):

Derivative Not Designated as Hedging Instrument:		Theoretical Swap (1)
		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Amount of gain (loss) recognized in income on derivative, pre tax		$	629			$	(760	)		$	1,027			$	(702	)

Derivative Cash Flow Hedging Relationships:		Interest Rate Swap (2)
		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
Amount of loss recognized in OCI on derivative, after tax		$	—			$	245			$	—			$	514
Amount of loss reclassified from OCI into income, pre tax		$	—			$	449			$	—			$	907

4. REDEEMABLE CONVERTIBLE PREFERRED STOCK

     Series A-1 Redeemable Convertible Preferred Stock

     Pursuant to the restated certificate of incorporation, the Board of Directors has the authority, without further action by the stockholders, to issue up to 3,000,000 shares of preferred stock in one or more series. Of these 3,000,000 shares of preferred stock, 75,000 shares have been designated Series A-1. The Series A-1 Preferred Stock has a redemption value of 115% of the face value of the stock, on or after seven years from the date of issuance, or July 3, 2013. The Company recognized $0.4 million for the three months ended June 30, 2010 and 2009 and $0.8 million for the six months ended June 30, 2010 and 2009, to adjust for the redemption value at maturity.

     Additionally, the Series A-1 Preferred Stock has a feature that grants holders the right to receive interest-like returns on accrued, but unpaid, dividends that accumulate at 8% per annum. For the three months ended June 30, 2010 and 2009, $1.5 million of preferred stock accretion was recognized and for the six months ended June 30, 2010 and 2009, $3.0 million of preferred stock accretion was recognized in the condensed consolidated statements of operations, for the 8% per annum cumulative dividends. The right to receive the accrued, but unpaid dividends is based on a variable interest rate, and as such the difference between the fixed and variable rate of returns is a theoretical swap derivative. The Company bifurcates this feature and accretes it to the Series A-1 Preferred Stock over the life of the security. For the three months ended June 30, 2010 and 2009, $0.3 million and $0.2 million, of preferred stock accretion expense were recognized and for the six months ended June 30, 2010 and 2009, $0.6 million and $0.4 million of preferred stock accretion expense were recognized for the theoretical swap derivative in the condensed consolidated statement of operations.

     Finally, the cost to issue the Series A-1 Preferred Stock of $5.1 million is being accreted back to the redemption value of the Series A-1 Preferred Stock through July 2013, and generated an additional $0.2 million and $0.4 million of preferred stock accretion for each of the three months and six months ended June 30, 2010 and 2009 in the condensed consolidated statements of operations.

5. REPORTABLE SEGMENTS

     The Company manages its business through two reportable segments: Banking and eCommerce. The Banking segment’s market consists primarily of banks, credit unions and other depository financial institutions in the United States. The segment’s fully integrated suite of account presentation, bill payment, relationship management and professional services are delivered through the Internet. The eCommerce segment’s market consists of billers, card issuers, processors, and other creditors such as payment acquirers and very large online billers. The segment’s account presentation, payment, relationship management and professional services are distributed to these clients through the Internet.

     Factors used to identify the Company’s reportable segments include the organizational structure of the Company and the financial information available for evaluation by the chief operating decision-maker in making decisions about how to allocate resources and assess performance. The Company’s operating segments have been broken out based on similar economic and other qualitative criteria. The Company operates both reporting segments in one geographical area, the United States. The Company’s management assesses the performance of its assets in the aggregate, and accordingly, they are not presented on a segment basis.

     The results of operations from these reportable segments were as follows for the three and six months ended June 30, 2010 and 2009 (in thousands):

		Banking				eCommerce				Corporate(1)				Total
Three months ended June 30, 2010:
Revenues		$	22,169			$	14,190			$	—			$	36,359
Costs of revenues			11,428				7,958				—				19,386
Gross profit			10,741				6,232				—				16,973
Operating expenses			6,218				4,679				4,775				15,672
Income (loss) from operations		$	4,523			$	1,553			$	(4,775	)		$	1,301
Three months ended June 30, 2009:
Revenues		$	23,047			$	14,736			$	—			$	37,783
Costs of revenues			11,494				8,522				—				20,016
Gross profit			11,553				6,214				—				17,767
Operating expenses			5,953				5,141				3,646				14,740
Income (loss) from operations		$	5,600			$	1,073			$	(3,646	)		$	3,027

Six months ended June 30, 2010:
Revenues		$	45,516			$	29,425			$	—			$	74,941
Costs of revenues			22,731				16,281				—				39,012
Gross profit			22,785				13,144				—				35,929
Operating expenses			12,472				9,424				9,015				30,911
Income (loss) from operations		$	10,313			$	3,720			$	(9,015	)		$	5,018
Six months ended June 30, 2009:
Revenues		$	45,929			$	31,094			$	—			$	77,023
Costs of revenues			22,482				17,198				—				39,680
Gross profit			23,447				13,896				—				37,343
Operating expenses			12,416				10,429				9,475				32,320
Income (loss) from operations		$	11,031			$	3,467			$	(9,475	)		$	5,023

6. INVESTMENTS

     The Company’s investment in the Columbia Strategic Cash Portfolio was liquidated in September 2009. During the six months ended June 30, 2009, the Company received $0.8 million in liquidation payments from the Fund administrator and realized a gain of $0.1 million for the six months ended June 30, 2009.

7. GOODWILL

     Goodwill is not amortized and is tested at the reporting unit level at least annually or whenever events or circumstances indicate that goodwill might be impaired. The fair value of the Company’s reporting units are measured under the income method by utilizing discounted cash flows. The estimates the Company uses in evaluating goodwill are consistent with the plans and estimates that the Company uses to manage its operations.

     The Company did not experience any impairment of goodwill or other intangible assets for the six months ended June 30, 2010 or 2009. The Company’s stock price declined from $5.26 as of December 31, 2009 to $4.15 as of June 30, 2010. The Company considered whether or not the decline in stock price indicated an impairment requiring reevaluation of the goodwill. Factors evaluated include consideration of the 2010

financial performance as well as other Company specific matters. The Company’s financial performance exceeded the financial projections included in the annual impairment testing and there was no indication that other assumptions used in the annual impairment testing were no longer appropriate. As a result, the Company concluded that there was no indication of impairment. The Company will continue to monitor its financial performance, stock price and other factors in order to determine if there are any indicators of impairment prior to its annual impairment evaluation date.

8. STOCK BASED COMPENSATION

     At June 30, 2010, the Company had three stock-based employee compensation plans. The Company used the modified-prospective transition method, as required, to recognize compensation costs; which include (a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the estimated grant date fair value, and (b) compensation cost for all share-based payments granted on or subsequent to January 1, 2006, based on the estimated grant-date fair value. The compensation expense for stock-based compensation was $0.6 million and $1.0 million for the three months and $1.6 million and $2.2 million for the six months ended June 30, 2010 and 2009, respectively. A portion of the stock based compensation cost has been capitalized as part of software development costs and deferred costs. For each of the three months ended June 30, 2010 and 2009, less than $0.1 million was capitalized as part of software development costs and deferred costs. For each of the six months ended June 30, 2010 and 2009, $0.1 million was capitalized as part of software development costs and deferred costs.

   Stock Options

     The fair value of each option award is estimated on the date of grant using a Black-Scholes-Merton option-pricing formula that uses the assumptions noted in the table and discussion that follows:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Dividend yield			—				—				—				—
Expected volatility			62	%			63	%			62	%			62	%
Risk-free interest rate			2.75	%			2.25	%			2.75	%			1.89	%
Expected life in years			6.4				6.3				6.4				5.8

     Dividend Yield. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

     Expected Volatility. Volatility is a measure of the amount by which a financial variable, such as a share price, has fluctuated (historical daily volatility) or is expected to fluctuate (expected volatility) during a period. The Company uses the historical average daily volatility over the average expected term of the options granted to estimate expected volatility.

     Risk-Free Interest Rate. The risk-free interest rate is the average U.S. Treasury rate for the week of each option grant during the period having a term that most closely resembles the expected term of the option.

     Expected Life of Option Term. Expected life of option term is the period of time that the options granted are expected to remain unexercised. Options granted during the period have a maximum term of seven to ten years. The Company uses historical expected terms, with further consideration given to the class of employees to whom the equity awards were granted, to estimate the expected life of the option term.

     Forfeiture Rate. Forfeiture rate is the estimated percentage of equity awards granted that are expected to be forfeited or canceled on an annual basis before becoming fully vested. The Company estimates forfeiture rate based on past turnover data ranging anywhere from one to five years with further consideration given to the class of employees to whom the equity awards were granted.

     A summary of stock option activity as of June 30, 2010, and changes in the period then ended is presented below (in thousands, except exercise price and remaining contract term data):

										Weighted-
						Weighted-				Average
						Average				Remaining				Aggregate
						Exercise				Contract				Intrinsic
		Shares				Price				Term				Value
Outstanding at January 1, 2010			3,254			$	5.52
Granted			281			$	4.64
Exercised			(278	)		$	3.11
Forfeited or expired			(406	)		$	7.35
Outstanding at June 30, 2010			2,851			$	5.40				3.30			$	1,784
Vested or expected to vest at June 30, 2010			2,838			$	5.41				3.29			$	1,780
Exercisable at June 30, 2010			2,220			$	5.61				2.52			$	1,583

     At June 30, 2010, approximately 2,585,000 shares of stock options were outstanding under the 1989, 1999 or 2005 Plans. Additionally, approximately 266,000 stock options were granted outside the Company’s plans during the second quarter of 2010 to the Company’s CEO as an inducement to join the Company.

     The weighted-average grant-date fair value of options granted was $2.80 and $3.14 per share during the three months ended June 30, 2010 and 2009, respectively and $2.80 and $2.01 per share during the six months ended June 30, 2010 and 2009, respectively. In the table above, the total intrinsic value is calculated as the difference between the market price of the Company’s stock on the last trading day of the quarter and the exercise price of the options. For options exercised, intrinsic value is calculated as the difference between the market price on the date of exercise and the grant price. The intrinsic value of options exercised in the three months ended June 30, 2010 and 2009 was $0.4 million and $0.2 million, respectively and $0.4 million and $0.3 million, respectively, for the six months ended June 30, 2010 and 2009.

     As of June 30, 2010, there was $1.3 million of total unrecognized compensation cost related to stock options granted under the 1999 and 2005 Plans. This cost is expected to be recognized over a weighted average period of 3.0 years.

     Cash received from option exercises under all share-based payment arrangements for the three months ended June 30, 2010 and 2009 was $0.8 million and $0.3 million, respectively, and $0.9 million and $0.6 million for the six months ended June 30, 2010 and 2009, respectively, net of shares repurchased to cover the cost of certain exercises and taxes. The tax benefits related to the deductions from option exercises of the share-based payment arrangements will be recognized when those deductions, currently being carried forward as net operating losses, reduce taxes payable.

  Restricted Stock Units

     A summary of the Company’s non-vested restricted stock units as of the six months ended June 30, 2010, and changes for the period then ended, is presented below (in thousands, except grant-date fair value data):

						Weighted-
						Average
						Grant-Date
		Shares				Fair Value
Non-vested at January 1, 2010			1,523			$	5.07
Granted			873			$	4.77
Vested			(754	)		$	4.52
Forfeited			(569	)		$	5.51
Non-vested at June 30, 2010			1,073			$	4.98

     At June 30, 2010, there were approximately 752,000 shares of non-vested restricted stock units under the 1989, 1999 or 2005 Plans. Additionally, approximately 321,000 restricted stock units were granted outside the Company’s plans during the second quarter of 2010 to the Company’s CEO as an inducement to join the Company.

     The fair value of non-vested units is determined based on the opening trading price of the Company’s shares on the grant date. As of June 30, 2010, there was $4.2 million of total unrecognized compensation cost related to non-vested restricted stock units granted under the 2005 Plan. This cost is expected to be recognized over a weighted average period of 2.6 years.

9. INCOME TAXES

     The Company recorded income tax expense based on the estimated effective tax rate for the full year, adjusted for non-forecastable items recorded during the first half of 2010.

     The Company’s effective tax rate was 30.5% and 54.4% for the three months ended June 30, 2010 and 2009, respectively and 36.3% and 46.1% for the six months ended June 30, 2010 and 2009, respectively. The year over year change in the effective tax rate relates to permanent differences, state taxes, a $0.1 million increase to the New Jersey net operating loss carryforwards valuation allowance, and a stock based compensation adjustment of approximately $0.2 million relating to the difference between the expected deduction from stock based compensation which is based upon the fair value of the award at the date of issuance and the actual deduction taken which is based upon the fair value of the award at the time the award is exercised or vests.

     The Company has determined that there have been no material changes in tax positions taken in the prior periods, tax positions taken in the current period, settlements with taxing authorities resulting from lapses in the statute of limitations and unrecognized tax benefits that if recognized would affect the effective tax rate and amount of interest and penalties recognized in the condensed consolidated statement of operations and the condensed consolidated balance sheets.

     The tax return years since 2000 in the Company’s major tax jurisdictions, both federal and various states, have not been audited and are not currently under audit. The Company does not have reason to expect any changes in the next twelve months regarding uncertain tax positions.

10. NET LOSS AVAILABLE TO COMMON STOCKHOLDERS PER SHARE

     The following table sets forth the computation of basic and diluted net loss available to common stockholders per share (in thousands, except per share amounts):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net income		$	1,069			$	576			$	3,249			$	1,207
Preferred stock accretion			2,374				2,287				4,711				4,536
Net loss available to common shareholders		$	(1,305	)		$	(1,711	)		$	(1,462	)		$	(3,329	)
Weighted average shares outstanding used in calculation of net loss available to common stockholders per share:
Basic			30,911				29,908				30,699				29,821
Dilutive stock options			—				—				—				—
Diluted			30,911				29,908				30,699				29,821
Net loss available to common stockholders per share:
Basic		$	(0.04	)		$	(0.06	)		$	(0.05	)		$	(0.11	)
Diluted		$	(0.04	)		$	(0.06	)		$	(0.05	)		$	(0.11	)

     Approximately 8,562,555 and 9,214,941 shares of common stock equivalents for the three months ended June 30, 2010 and 2009, respectively, and approximately 8,198,816 and 8,853,997 shares of common stock equivalents for the six months ended June 30, 2010 and 2009, respectively were excluded from the calculation of diluted earnings per share because of their anti-dilutive effect.

11. COMPONENTS OF COMPREHENSIVE LOSS

     Shown below are items defined as comprehensive loss that are separately classified in the financial statements. The following table reconciles the Company’s net loss available to common stockholders and its total comprehensive net loss for the three and six months ended June 30, 2010 and 2009 (in thousands):

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2010				2009				2010				2009
Net loss available to common stockholders		$	(1,305	)		$	(1,711	)		$	(1,462	)		$	(3,329	)
Other comprehensive loss:
Realized loss on hedging activity			—				449				—				907
Net unrealized loss on hedging activity			—				(245	)			—				(514	)
Comprehensive net loss		$	(1,305	)		$	(1,507	)		$	(1,462	)		$	(2,936	)

12. FAIR VALUE MEASUREMENTS

     Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In addition, the standard specifies that the fair value should be the exit price, or price received to sell the asset or liability as opposed to the entry price, or price paid to acquire an asset or assume a liability.

     The standard provides valuation techniques and a fair value hierarchy used to measure fair value. The hierarchy prioritizes inputs for valuation techniques used to measure fair value into three categories:

The tables below show how the Company categorizes certain financial assets and liabilities based on the types of inputs used in valuation techniques for measuring fair value:

		Fair Value Measurements at June 30, 2010
		Quoted
		Prices in
		Active
		Markets				Significant
		for				Other				Significant
		Identical				Observable				Unobservable
		Assets				Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Financial assets (in thousands):
Merrill Lynch Institutional Fund		$	12,635			$	—			$	—			$	12,635
Theoretical swap derivative(1)			—				—				5,695				5,695
		$	12,635			$	—			$	5,695			$	18,330

		Fair Value Measurements at December 31, 2009
		Quoted
		Prices in
		Active				Significant
		Markets for				Other				Significant
		Identical				Observable				Unobservable
		Assets				Inputs				Inputs
		(Level 1)				(Level 2)				(Level 3)				Total
Financial assets (in thousands):
Merrill Lynch Institutional Fund		$	7,623			$	—			$	—			$	7,623
Theoretical swap derivative(1)			—				—				4,668				4,668
		$	7,623			$	—			$	4,668			$	12,291

     The following tables are summaries of the Company’s financial assets that use Level 3 inputs to measure fair value (in thousands):

		Theoretical
		Swap Derivative
Balance as of January 1, 2010		$	4,668
Realized and unrealized gain(1)			1,027
Balance as of June 30, 2010		$	5,695

		Strategic Cash				Theoretical
		Fund Investment				Swap Derivative
Balance as of January 1, 2009		$	2,009			$	4,562
Realized and unrealized gain(1)			76				(702	)
Redemptions(2)			(770	)			—
Balance as of June 30, 2009		$	1,315			$	3,860

13. COMMITMENTS & CONTINGENCIES

     On April 16, 2010, Mr. Lawlor, former Chairman and Chief Executive Officer of the Company, commenced an action in the Circuit Court of Fairfax County, Virginia, captioned Lawlor v. Online Resources Corporation , Case No. 2010-5601. The action asserts employment claims for breach of contract under two stock option plans, breach of an implied employment agreement, unjust enrichment, wrongful termination and a declaratory judgment claim that a change in control occurred under the Company’s stock option plan, and requests damages of $14 million. The Company disputes all the claims raised by Mr. Lawlor and has determined the lawsuit is without merit; as a result, the Company has not recorded a provision for this legal action.

     On May 19, 2010, Mr. Lawlor filed a complaint with the U.S. Department of Labor alleging that the Company wrongfully terminated him in contravention of Section 806 of the Sarbanes-Oxley Act. Mr. Lawlor contends that he was terminated as CEO in retaliation for raising concerns of alleged insider trading violations to the Company. The Company denies the allegations.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OPERATIONS CAUTIONARY NOTE

     The following management’s discussion and analysis should be read in conjunction with the accompanying Condensed Consolidated Unaudited Financial Statements and Notes thereto. This Quarterly Report on Form 10-Q may contain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, including, but not limited to:

	•		Any statements that are not statements of historical fact;
	•		Statements regarding trends in our revenues, expense levels, and liquidity and capital resources;
	•		Statements about the sufficiency of the proceeds from the sale of securities and cash balances to meet currently planned working capital and capital expenditure requirements for at least the next twelve months; and
	•		Other statements identified or qualified by words such as “likely”, “will”, “suggest”, “may”, “would”, “could”, “should”, “expects”, “anticipates”, “estimates”, “plans”, “projects”, “believes”, “seeks”, “intends” and other similar words that signify forward-looking statements.

     These forward-looking statements represent our best judgment as of the date of the Quarterly Report on Form 10-Q, and we caution readers not to place undue reliance on such statements. Actual performance and results of operations may differ materially from those projected or suggested in the forward-looking statements due to certain risks and uncertainties, including but not limited to, the risks and uncertainties described or discussed in the section “Risk Factors” in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 10, 2010. These risks include, among others, the following:

	•		our history of prior losses and the lack of certainty of maintaining consistent profitability;
	•		our dependence on the marketing assistance of third parties to market our services;
	•		the possibility that we may not be able to expand to meet increased demand for our services and related products;
	•		the potential adverse impact that client departures may have on our financial results;
	•		our inability to attract and retain qualified management and technical personnel and our dependence on our executive officers and key employees;
	•		potential security breaches or system failures disrupting our business and the liability associated with these disruptions;
	•		the failure to properly develop, market or sell new products;
	•		the potential impact of the consolidation of the banking and financial services industry;
	•		the effect of adoption of government regulations on our business may be problematic;
	•		our need to maintain satisfactory ratings from federal depository institution regulators;
	•		exposure to increased compliance costs and risks associated with increasing and new regulation of corporate governance and disclosure standards;
	•		the liquidation preference rights and redemption rights associated with our outstanding shares of preferred stock;
	•		the voting rights of our preferred stock restricting our right to take certain actions;
	•		the potential losses we may incur from the impairment of the goodwill we have obtained from our acquisitions;

	•		our inability to obtain additional financing to grow our business;
	•		the concentration of our clients in a small number of industries, including the financial services industry, and changes within those industries reducing demand for our products and services;
	•		the failure to retain existing end-users or changes in their continued use of our services adversely affecting our operating results;
	•		demand for low-cost or free online financial services and competition placing significant pressure on our pricing structure and revenues;
	•		exposure to greater than anticipated tax liabilities;
	•		our quarterly financial results being subject to fluctuations and having a material adverse effect on the price of our stock;
	•		our limited ability to protect our proprietary technology and other rights;
	•		the need to redesign our products, pay royalties or enter into license agreements with third parties as a result of our infringing the proprietary rights of third parties;
	•		the potential obsolescence of our technology or the offering of new, more efficient means of conducting account presentation and payments services negatively impacting our business;
	•		errors and bugs existing in our internally developed software and systems as well as third-party products;
	•		the disruption of our business and the diversion of management’s attention resulting from breach of contract or product liability suits;
	•		difficulties in integrating acquired businesses;
	•		our having limited knowledge of, or experience with, the industries served and products provided by our acquired businesses;
	•		the increase in the size of our operations and the risks described herein from acquisitions or otherwise;
	•		the liabilities or obligations that were not or will not be adequately disclosed from acquisitions we have made and may make;
	•		the claims that may arise from acquired companies giving us limited warranties and indemnities in connection with their businesses;
	•		the effect on the trading price of our stock from the sale of the substantial number of shares of common and convertible preferred stock outstanding, including shares issued in connection with certain acquisitions and shares that may be issued upon exercise of grants under our equity compensation plans;
	•		the significant amount of debt which will have to repay;
	•		the adverse effect to the market price of our common stock from future offerings of debt and preferred stock which would be senior to our common stock upon liquidation; and
	•		the acceleration of repayment of borrowed funds if a default under the terms of our credit agreement arises.

OVERVIEW

     We provide outsourced web- and phone- based financial technology services branded to financial institution, biller, card issuer and creditor clients and their millions of consumer end-users. We currently derive approximately 80% of our revenues from payments and 20% from other services including account presentation, relationship management, professional services, and custom software solutions. End-users may access and view their accounts online and perform various self-service functions. They may also make electronic bill payments and funds transfers utilizing our unique, real-time debit architecture, ACH and other payment methods. Our value-added relationship management services reinforce a favorable user experience and drive a profitable and competitive online channel for our clients. Further, we provide professional

services, including software solutions, which enable various deployment options, a broad range of customization and other value-added services.

          We currently operate in two business segments — Banking and eCommerce. The operating results of these business segments exclude general corporate overhead expenses and intangible asset amortization. Within each business segment, we face differing opportunities, challenges and risks. In our Banking segment we have the opportunity to deploy the new and enhanced products we have developed to deepen the relationships we have with our existing clients. Our differentiated account presentation and payments products, as well as our ability to deliver a full suite of remote delivery financial services, provide the opportunity for us to increase market share particularly among mid-sized financial institutions. In the bank market, a very large percentage of financial institutions now offer internet banking and bill payment to their customers. We therefore face competition in our efforts to obtain new clients from other established providers of these services. The end-user base within these clients is not highly penetrated, however, so we benefit from continuing adoption increases.

     Additionally, financial service providers have recently been adversely affected by significant illiquidity and credit tightening trends in the financial markets in which they operate. Unfavorable economic conditions adversely impacting those types of business could have a material adverse effect on our business.

     In our eCommerce segment, there are still a significant number of potential clients who do not offer services such as those we are in a position to provide to their customer base. Further, the competition to provide these services is more fragmented than it is in the banking market. These factors provide us with the opportunity to expand our client base. We also offer an innovative debt collection product that is attractive to a number of large and mid-sized potential clients. For a portion of our eCommerce business, our revenue is tied to the value of the payment being made which exposes us to the impact of economic factors on these payments. We also continuously monitor the potential risks that we face due to the interfaces we have with, and our reliance on, various payments networks.

     Across our markets, we are exposed to interest rate risk as we earn float interest in clearing accounts that hold funds collected from end-users until they are disbursed to receiving merchants or financial institutions. We also closely monitor covenant and other compliance requirements under our debt and preferred stock agreements, as well as other potential risks associated with our capital structure.

     In the past we have experienced, and expect to return to, significant user and transaction growth. Growth places significant demands on our personnel, management and other resources. We may need to expand and adapt our infrastructure, services and related products to accommodate additional clients and their end-users, increased transaction volumes and changing end-user requirements.

     Registered end-users using account presentation, bill payment or both, and the payment transactions executed by those end-users are the major drivers of our revenues. At June 30, 2010 in comparison to December 31, 2009, the number of users of our account presentation services increased 3%, and the number of users of our payment services decreased 4%, for an overall 3% decrease in users.

     We have long-term service contracts with most of our clients. The majority of our revenues are recurring, though these contracts also provide for implementation, set-up and other non-recurring fees. Account presentation services revenues are based on either a monthly license fee, allowing our clients to register an unlimited number of customers, or a monthly fee for each registered customer. Payment services revenues are either based on a monthly fee for each customer enrolled, a fee per executed transaction, or a combination of both. Our clients pay nearly all of our fees and then determine if or how they want to pass these costs on to their users. They typically provide account presentation services to users free of charge, as they derive significant potential benefits including account retention, delivery and paper cost savings, account consolidation and cross-selling of other products.

     As a network-based service provider, we have made substantial up-front investments in infrastructure, particularly for our proprietary systems. We invested approximately $9.1 million for the six months ended June 30, 2010, and $6.2 million and $7.4 million for the years ended December 31, 2009 and 2008, respectively. These investments were made to create new products, enhance the functionality of existing products and improve our infrastructure. Product enhancements allow us to remain competitive, retain existing clients and attract new clients. New products allow us to increase revenue and attract new clients. Infrastructure investments allow us to leverage ongoing advances in technology to improve our operating efficiency and capture cost savings. Our investments increased significantly in the first half of 2010 due to investments made in periodic expansions of our data storage and processing capacity and the investment in client specific infrastructure.

     While we continue to incur ongoing development and maintenance costs, we believe the infrastructure we have built provides us with operating leverage. We continue to automate processes and develop applications that allow us to make smaller increases in labor and other operating costs relative to increases in customers and transactions. We believe our financial and operating performance will be based primarily on our ability to leverage additional end-users and transactions over this relatively fixed cost base.

     Registered end-users using account presentation, payment services or both, and the payment transactions executed by those end-users are the major drivers of our revenues. Since June 30, 2009, the number of account presentation services users increased by 25%, and the number of payment services users increased 15%, for an overall 15% increase in users. The increase in account presentation services users is due to new clients as well as increased users with existing clients.

Results of Operations The following table presents the summarized results of operations for our two reportable segments, Banking and eCommerce (dollars in thousands):

		Three Months Ended June 30,																Six Months Ended June 30,
		2010								2009								2010								2009
		Dollars				%				Dollars				%				Dollars				%				Dollars				%
Revenues:
Banking		$	22,169				61	%		$	23,047				61	%		$	45,516				61	%		$	45,929				60	%
eCommerce			14,190				39	%			14,736				39	%			29,425				39	%			31,094				40	%
Total		$	36,359				100	%		$	37,783				100	%		$	74,941				100	%		$	77,023				100	%

		Dollars				Margin				Dollars				Dollars				Margin				Margin				Dollars				Margin
Gross profit:
Banking		$	10,741				48	%		$	11,553				50	%		$	22,785				50	%		$	23,447				51	%
eCommerce			6,232				44	%			6,214				42	%			13,144				45	%			13,896				45	%
Total		$	16,973				47	%		$	17,767				47	%		$	35,929				48	%		$	37,343				48	%

		Three Months Ended June 30,																Six Months Ended June 30,
		2010								2009								2010								2009
		Dollars				%				Dollars				%				Dollars				%				Dollars				%
Operating expenses:
Banking		$	6,218				40	%		$	5,953				40	%		$	12,472				40	%		$	12,416				39	%
eCommerce			4,679				30	%			5,141				35	%			9,424				31	%			10,429				32	%
Corporate(1)			4,775				30	%			3,646				25	%			9,015				29	%			9,475				29	%
Total		$	15,672				100	%		$	14,740				100	%		$	30,911				100	%		$	32,320				100	%

		Dollars				Margin				Dollars				Margin				Dollars				Margin				Dollars				Margin
Income from operations:
Banking		$	4,523				20	%		$	5,600				24	%		$	10,313				23	%		$	11,031				24	%
eCommerce			1,553				11	%			1,073				7	%			3,720				13	%			3,467				11	%
Corporate(1)			(4,775	)							(3,646	)							(9,015	)							(9,475	)
Total		$	1,301				4	%		$	3,027				8	%		$	5,018				7	%		$	5,023				7	%

THREE MONTHS ENDED JUNE 30, 2010 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2009

Revenues

     We generate revenues from account presentation, payment, relationship management and professional services and other revenues.

		Three Months Ended
		June 30,								Change
		2010(1)				2009(1)				Difference(1)				%
Revenues:
Account presentation services		$	2,058			$	1,954			$	104				5	%
Payment services			28,145				30,027				(1,882	)			(6	)%
Relationship management services			2,042				2,000				42				2	%
Professional services and other			4,114				3,802				312				8	%
Total revenues		$	36,359			$	37,783			$	(1,424	)			(4	)%
Payment metrics:
Banking payment transactions			36,596				37,304				(708	)			( 2	)%
Biller payment transactions			17,185				15,112				2,073				14	%

     Account Presentation Services. Both the Banking and eCommerce segments contribute to account presentation services revenues, which increased 5%, or $0.1 million, to $2.1 million. The increase is primarily due to a $0.2 million increase in user fees, a $0.1 million increase in account maintenance fees offset by a $0.3 million decrease in card usage fees.

     Payment Services. Both the Banking and eCommerce segments contribute to payment services revenues, which decreased to $28.1 million for the three months ended June 30, 2010 from $30.0 million in the prior year quarter. The decrease is primarily due to declines of $1.0 million in user fees and $0.8 million in electronic transaction fees related to client losses and reduced fees per transaction for three large clients, partially offset by increased transactions.

     Relationship Management Services. Primarily composed of revenues from the Banking segment, relationship management services revenues remained constant compared to the same period in 2009.

     Professional Services and Other. Both the Banking and eCommerce segments contribute to professional services and other revenues, which increased $0.3 million, or 8%. The increase is primarily due to a $0.3 million increase in implementation fees and a $0.3 million increase in ancillary service fees offset by a $0.4 million decrease in cancellation fees.

Costs and Expenses

		Three Months Ended
		June 30,								Change
		2010(1)				2009(1)				Difference(1)				%
Revenues		$	36,359			$	37,783			$	(1,424	)			(4	)%
Costs of revenues			19,386				20,016				(630	)			(3	)%
Gross profit			16,973				17,767				(794	)			(4	)%
Gross margin			47	%			47	%
Operating expenses
General and administrative			8,273				6,887				1,386				20	%
Sales and marketing			4,846				5,722				(876	)			(15	)%
Systems and development			2,553				2,131				422				20	%
Total operating expenses			15,672				14,740				932				6	%
Income from operations			1,301				3,027				(1,726	)			(57	)%
Other income (expense)
Interest income			14				36				(22	)			(61	)%
Interest and other expense			223				(1,799	)			2,022				(112	)%
Total other income (expense)			237				(1,763	)			2,000				(113	)%
Income before tax provision			1,538				1,264				274				22	%
Income tax provision			469				688				(219	)			(32	)%
Net income			1,069				576				493				86	%
Preferred stock accretion			2,374				2,287				87				4	%
Net loss available to common stockholders		$	(1,305	)		$	(1,711	)		$	406				(24	)%
Net loss available to common stockholders per share:
Basic		$	(0.04	)		$	(0.06	)		$	0.02				33	%
Diluted		$	(0.04	)		$	(0.06	)		$	0.02				33	%
Shares used in calculation of net loss available to common stockholders per share:
Basic			30,911				29,908				1,003				3	%
Diluted			30,911				29,908				1,003				3	%