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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 1 - us-gaap:OrganizationConsolidationAndPresentationOfFinancialStatementsDisclosureTextBlock-->
<!-- xbrl,ns -->
<!-- xbrl,nx -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="center" style="font-size: 10pt; margin-top: 0pt"><b></b>
</div>
<div align="left">
</div>
<div align="center" style="font-size: 10pt"><b></b>
<b></b></div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>1. Organization and Operations</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">TechTarget, Inc. (the “Company”) is a leading provider of specialized online content that
brings together buyers and sellers of corporate information technology (“IT”) products. The Company
sells customized marketing programs that enable IT vendors to reach corporate IT decision makers
who are actively researching specific IT purchases. Online content is specifically defined as
those advertising and media offerings being available to users via internet websites as opposed to
traditional “offline” media offerings available in print, radio and television advertising.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s
integrated content platform consists of a network of more than 100 websites that
are complemented with targeted in-person events. During the critical stages of the purchase
decision process, these content offerings meet IT professionals’ needs for expert, peer and IT
vendor information, and provide a platform on which IT vendors can launch targeted marketing
campaigns that generate measurable, high return on investment (“ROI”). As IT professionals have
become increasingly specialized, they have come to rely on the Company’s sector-specific websites
for purchasing decision support. The Company’s content enables IT professionals to navigate the
complex and rapidly changing IT landscape where purchasing decisions can have significant financial
and operational consequences. Based upon the logical clustering of users’ respective job
responsibilities and the marketing focus of the products that the Company’s customers are
advertising, content offerings are currently categorized across nine distinct media groups:
Application Architecture and Development; Channel; CIO/IT Strategy; Data Center and Virtualization
Technologies; Business Applications and Analytics; Networking; Security; Storage; and
TechnologyGuide.com.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 2 - us-gaap:SignificantAccountingPoliciesTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>2. Summary of Significant Accounting Policies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying consolidated financial statements reflect the application of certain
significant accounting policies as described below and elsewhere in these notes to the consolidated
financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Principles of Consolidation</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying consolidated financial statements include the accounts of the Company and its
wholly-owned subsidiaries, which include KnowledgeStorm, Inc., Bitpipe, Inc., TechTarget Securities
Corporation, TechTarget Limited and TechTarget (HK) Limited. KnowledgeStorm, Inc. and Bitpipe, Inc.
are leading websites providing in-depth vendor generated content targeted toward corporate IT
professionals. TechTarget Securities Corporation is a Massachusetts Securities Corporation
incorporated in 2004. TechTarget Limited is a subsidiary doing business principally in the United
Kingdom. TechTarget (HK) Limited is a subsidiary incorporated in Hong Kong in August 2010 in order
to facilitate the Company’s activities in Asia-Pac. Additionally, as of October 1, 2010, through
its wholly-owned subsidiary, TechTarget (HK) Limited (“TTGT HK”), the Company effectively controls
a variable interest entity (“VIE”), Keji Wangtuo Information Technology Co., Ltd, (“KWIT”), which
was incorporated under the laws of the People’s Republic of China (“PRC”) on November 27, 2007.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">PRC laws and regulations prohibit or restrict foreign ownership of Internet-related services
and advertising businesses. To comply with these foreign ownership restrictions, the Company
operates its websites and provides online advertising services in the PRC through this VIE. The
Company has entered into certain exclusive agreements with the VIE and its shareholders through
TTGT HK, which obligate TTGT HK to absorb a majority of the risk of loss from the VIE’s activities
and entitles TTGT HK to receive a majority of their residual returns. In addition, the Company has
entered into certain agreements with the authorized parties through TTGT HK, including Management
and Consulting Services, Voting Proxy, Equity Pledge and Option Agreements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Based on these contractual arrangements, the Company consolidates the VIE as required by
Accounting Standards Codification (“ASC”) subtopic 810-10 (“ASC 810-10”), <i>Consolidation: Overall</i>
(Pre-Codification: Financial Accounting Standards Board (“FASB”) Interpretation No. 46R,
<i>Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51</i>), because the Company
holds all the variable interests of the VIE through TTGT HK, which is the primary beneficiary of
the VIE. Despite the lack of technical majority ownership, there exists a parent-subsidiary
relationship between the Company and the VIE through the aforementioned agreements, whereby the
equity holders of the VIEs effectively assigned all of their voting rights underlying their equity
interest in the VIE to TTGT HK. In addition, through the other aforementioned agreements, the
Company demonstrates its ability and intention to continue to exercise the ability to obtain
substantially all of the profits and absorb all of the expected losses of the VIE. All significant
intercompany accounts and transactions between the Company, its subsidiaries, and the VIE have been
eliminated in consolidation.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Basis of Presentation</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The accompanying unaudited consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (generally accepted accounting
principles, or “GAAP”) for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for complete financial
statements. All adjustments, which, in the opinion of management, are considered necessary for a
fair presentation of the results of operations for the periods shown, are of a normal recurring
nature and have been reflected in the consolidated financial statements. The results of operations
for the periods presented are not necessarily indicative of results to be expected for any other
interim periods or for the full year. The information included in these consolidated financial
statements should be read in conjunction with “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” contained in this report and the consolidated financial
statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Reclassifications</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In 2011, the Company changed the manner in which it allocates real estate facilities costs to
align with actual departmental headcount. Previously, these costs were all included as a part of
general and administrative expenses. Amounts in the prior years’ financial statements have been
reclassified to conform to the current year presentation. In the three months ended June 30, 2010
this resulted in additional online cost of sales, events cost of sales, sales and marketing and
product development expense of $388, $71, $429 and $159, respectively, offset by a decrease in
general and administrative expense of $1.0 million. In the six months ended June 30, 2010 this
resulted in additional online cost of sales, events cost of sales, sales and marketing and product
development expense of $794, $144, $927 and $330, respectively, offset by a decrease in general and
administrative expense of $2.2 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Use of Estimates</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The preparation of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Revenue Recognition</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company generates substantially all of its revenue from the sale of targeted advertising
campaigns that are delivered via its network of websites and events. Revenue is recognized only
when the price is fixed or determinable, persuasive evidence of an arrangement exists, the service
is performed and collectability of the resulting receivable is reasonably assured.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Although each of the Company’s online media offerings can be sold separately, the majority of
the Company’s online media sales involve multiple online offerings, which are described in more
detail below. During fiscal 2010 and prior, because objective evidence of fair value did not exist
for all elements in the Company’s bundled advertising campaigns, no allocation could be made among
the various elements, so the Company recognized revenue on all units of accounting ratably over the
term of the arrangement. In September 2009, the FASB ratified Accounting Standards Update (“ASU”)
2009-13, <i>Revenue Arrangements with Multiple Deliverables</i>, which updates the existing
multiple-element revenue arrangements guidance included in ASC 605-25. ASU 2009-13 requires
companies to allocate the overall consideration to each deliverable by using a best estimate of
selling price of individual deliverables in the arrangement in the absence of vendor-specific
objective evidence or other third party evidence of selling price. The Company adopted the new
standard, beginning on January 1, 2011, on a prospective basis. Because neither vendor-specific
objective evidence of fair value nor third party evidence of selling price exists for all elements
in the Company’s bundled advertising campaigns, the Company uses an estimated selling price which
represents management’s best estimate of the stand-alone selling price of deliverables for each
deliverable in an arrangement. The Company uses the relative selling price method to allocate
consideration at the inception of the arrangement to each deliverable in a multiple element
arrangement. The relative selling price method allocates any discount in the arrangement
proportionately to each deliverable on the basis of the deliverable’s selling price. Revenue is
then recognized as delivery occurs. For content posted on websites, revenue recognition is
generally over the period the content is available.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has concluded that adoption of this standard did not materially affect results in
the first half of 2011, nor is it expected to materially affect future periods.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Event Sponsorships. </i>Revenue from vendor-sponsored events, whether sponsored exclusively by a
single vendor or in a multi-vendor sponsored event, is recognized upon completion of the event in
the period the event occurs. The
majority of the Company’s events are free to qualified attendees; however, certain events are
based on a paid attendee model. The Company recognizes revenue for paid attendee events upon
completion of the event and receipt of payment from the attendee. Amounts collected or billed prior
to satisfying the above revenue recognition criteria are recorded as deferred revenue.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><i>Online Media. </i>Revenue for online media offerings is recognized for specific online media
offerings as follows when these items are sold separately:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>White Papers. </i>White paper revenue is recognized ratably over the
period in which the white paper is available on the Company’s
websites.</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Webcasts, Podcasts, Videocasts and Virtual Trade Shows. </i>Webcast,
podcast, videocast, virtual trade show and similar content revenue is
recognized ratably over the period in which the webcast, podcast,
videocast or virtual trade show is available on the Company’s
websites.</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Custom Media</i>. Custom media revenue is recognized ratably over the
period in which the custom media is available on the Company’s
websites.</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Promotional E-mails and E-newsletters. </i>Promotional e-mail revenue is
recognized ratably over the period in which the related content is
available on its websites because promotional e-mails do not have
standalone value from the related content. E-newsletter revenue is
recognized in the period in which the e-newsletter is sent.</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>List Rentals. </i>List rental revenue is recognized in the period in
which the e-mail is sent to the list of registered members.</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Banners. </i>Banner revenue is recognized in the period in which the banner impressions occur.</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Third Party Revenue Sharing Arrangements. </i>Revenue from third party
revenue sharing arrangements is recognized on a net basis in the
period in which the services are performed. For certain third party
agreements where the Company is the primary obligor, revenue is
recognized on a gross basis in the period in which the services are
performed.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Amounts collected or billed prior to satisfying the above revenue recognition criteria are
recorded as deferred revenue.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Fair Value of Financial Instruments</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Financial instruments consist of cash and cash equivalents, short and long-term investments,
accounts receivable and accounts payable. The carrying value of these instruments approximates
their estimated fair values.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Long-lived Assets</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Long-lived assets consist primarily of property and equipment, goodwill and other intangible
assets. A specifically identified intangible asset must be recorded as a separate asset from
goodwill if either of the following two criteria is met: (1) the intangible asset acquired arises
from contractual or other legal rights; or (2) the intangible asset is separable. Accordingly,
intangible assets consist of specifically identified intangible assets. Goodwill is the excess of
any purchase price over the estimated fair market value of net tangible assets acquired not
allocated to specific intangible assets.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Goodwill and indefinite-lived intangible assets are not amortized, but are reviewed annually
for impairment or more frequently if impairment indicators arise. Separable intangible assets that
are not deemed to have an indefinite life are amortized over their estimated useful lives, which
range from one to nine years, using methods of amortization that are expected to reflect the
estimated pattern of economic use, and are reviewed for impairment when events or changes in
circumstances suggest that the assets may not be recoverable. The Company performs its annual test
of impairment of goodwill as of December 31st of each year and whenever events or changes in
circumstances suggest that the carrying amount may not be recoverable. Based on this evaluation,
the Company believes that, as of each of the balance sheet dates presented, none of the Company’s
goodwill or other long-lived assets was impaired.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Internal-Use Software and Website Development Costs</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company capitalizes costs incurred during the development of its website applications and
infrastructure as well as certain costs relating to internal-use software. The estimated useful
life of costs capitalized is evaluated for each specific project. Capitalized internal-use software
and website development costs are reviewed for recoverability whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be recoverable. An impairment
loss shall be recognized only if the carrying amount of the asset is not recoverable and exceeds
its fair value. The Company capitalized internal-use software and website development costs of $0.8
million and $0.5 million for the three months ended June 30, 2011 and 2010, respectively, and $1.6
million and $1.0 million for the six months ended June 30, 2011 and 2010, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Income Taxes</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s deferred tax assets and liabilities are recognized based on temporary
differences between the financial reporting and income tax bases of assets and liabilities using
statutory rates. If required, a valuation allowance is established against net deferred tax assets
if, based upon available evidence, it is more likely than not that some or all of the deferred tax
assets will not be realized. The Company recognizes any interest and penalties related to uncertain
tax positions in income tax expense.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Stock-Based Compensation</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At June 30, 2011, the Company had two stock-based employee compensation plans which are more
fully described in Note 11. Stock-based compensation cost is measured at the grant date based on
the fair value of the award and is recognized in the Statement of Operations on a straight-line
basis over the vesting period of the award or using the accelerated method if the award is
contingent upon performance goals. The Company uses the Black-Scholes option-pricing model to
determine the fair value of stock option awards.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Net Income (Loss) Per Share</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Basic earnings per share is computed based on the weighted average number of common shares and
vested restricted stock awards outstanding during the period. Because the holders of unvested
restricted stock awards do not have nonforfeitable rights to dividends or dividend equivalents, the
Company does not consider these awards to be participating securities that should be included in
its computation of earnings per share under the two-class method. Diluted earnings per share is
computed using the weighted average number of common shares and vested restricted stock awards
outstanding during the period, plus the dilutive effect of potential future issuances of common
stock relating to stock option programs and other potentially dilutive securities using the
treasury stock method. In calculating diluted earnings per share, the dilutive effect of stock
options is computed using the average market price for the respective period. In addition, the
assumed proceeds under the treasury stock method include the average unrecognized compensation
expense and assumed tax benefit of stock options that are in-the-money. This results in the
“assumed” buyback of additional shares, thereby reducing the dilutive impact of stock options.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Recent Accounting Pronouncements</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards
Update (“ASU”) 2009-14, <i>Certain Revenue Arrangements That Include Software Elements </i>(“ASU
2009-14”). ASU 2009-14 amends guidance included within Accounting Standards Codification (“ASC”)
Topic 985-605 to exclude tangible products containing software components and non-software
components that function together to deliver the product’s essential functionality. Entities that
sell joint hardware and software products that meet this scope exception will be required to follow
the guidance of ASU 2009-13. ASU 2009-14 is effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010. Early
adoption and retrospective application are also permitted. The Company determined that adopting
the provisions of ASU 2009-14 did not impact its consolidated financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In December 2010, the FASB issued ASU 2010-29, <i>Disclosure of Supplementary Pro Forma
Information for Business Combinations </i>(Topic 805), which specifies that if a public entity presents
financial statements, the entity should disclose revenue and earnings of the combined entity as
though the business combination(s) that occurred during the year occurred as of the beginning of
the comparable prior annual reporting period only. This ASU also expands the supplemental pro
forma disclosure. The ASU is effective for business combinations for which the acquisition date is
on or after the annual reporting period beginning on or after December 15, 2010. The adoption of
this standard did not affect the Company’s consolidated financial statements.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In May 2011, the FASB issued ASU 2011-04, <i>Fair Value Measurement: Amendments to Achieve Common
Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (“ASU 2011-04”)</i>, which
provides common requirements for measuring fair value and for disclosing information about fair
value measurements in accordance with GAAP and International Financial Reporting Standards
(“IFRS”). ASU 2011-04 changes certain fair value measurement principles, clarifies the application
of existing fair value measurement and expands ASC 820 disclosure requirements, particularly for
Level 3 fair value measurements. ASU 2011-04 is effective during interim and annual periods
beginning after December 15, 2011. Early application is prohibited. The Company is currently
assessing the potential impact of this standard but does not expect the adoption of the standard to
have a material impact on the Company’s consolidated financial statements.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In June 2011, the FASB issued ASU 2011-05, <i>Presentation of Comprehensive Income, </i>which
requires entities to present reclassification adjustments included in other comprehensive income on
the face of the financial statements and allows entities to present the total of comprehensive
income, the components of net income and the components of other comprehensive income either in a
single continuous statement of comprehensive income or in two separate but consecutive statements.
It also eliminates the option for entities to present the components of other comprehensive income
as part of the statement of changes in stockholders’ equity. For public companies, ASU 2011-05 is
effective for fiscal years (and interim periods within those years) beginning after December 15,
2011, with earlier adoption permitted. Adoption of this ASU is not expected to have a material
effect on the Company’s consolidated financial statements.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>3. Fair Value Measurements</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company measures certain financial assets at fair value on a recurring basis, including
cash equivalents, and short and long-term investments. The fair value of these financial assets was
determined based on three levels of input as follows:
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Level 1. </i>Quoted prices in active markets for identical assets and liabilities;</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Level 2. </i>Observable inputs other than quoted prices in active markets; and</td>
</tr>
</table>
</div>
<div style="margin-top: 10pt">
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr valign="top" style="font-size: 10pt; color: #000000; background: transparent">
<td width="4%" style="background: transparent"> </td>
<td width="3%" nowrap="nowrap" align="left"><b>•</b></td>
<td width="1%"> </td>
<td><i>Level 3. </i>Unobservable inputs.</td>
</tr>
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The fair value hierarchy of the Company’s financial assets and liabilities carried at fair
value and measured on a recurring basis is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements at Reporting Date Using</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>in Active</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Markets for</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Identical</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Observable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Assets</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market funds(1)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">8,173</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,173</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Short-term investments(2)
</div></td>
<td> </td>
<td> </td>
<td align="right">10,474</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">10,474</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Long-term investments(2)
</div></td>
<td> </td>
<td> </td>
<td align="right">22,094</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">22,094</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40,741</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">8,173</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">32,568</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>Fair Value Measurements at Reporting Date Using</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Quoted Prices</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>in Active</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Markets for</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Other</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Significant</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Identical</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Observable</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unobservable</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Assets</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Inputs</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 1)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 2)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>(Level 3)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market funds(1)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">23,375</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23,375</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Short-term investments(2)
</div></td>
<td> </td>
<td> </td>
<td align="right">17,550</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">17,550</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">40,925</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23,375</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">17,550</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>Included in cash and cash equivalents on the accompanying consolidated balance sheets; valued at quoted market
prices in active markets.</td>
</tr>
<tr style="font-size: 3pt">
<td> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(2)</td>
<td> </td>
<td>Our short and long-term investments consist of government agency and municipal bonds; their fair value is
calculated using an interest rate yield curve for similar instruments.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>4. Cash, Cash Equivalents and Investments</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Cash and cash equivalents consist of highly liquid investments with maturities of three months
or less at date of purchase. Cash equivalents are carried at cost, which approximates their fair
market value. Cash and cash equivalents consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>December 31,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(Unaudited)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
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<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cash
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">13,644</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">9,209</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Money market funds
</div></td>
<td> </td>
<td> </td>
<td align="right">8,173</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">23,375</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total cash and cash equivalents
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">21,817</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">32,584</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s short and long-term investments are accounted for as available for sale
securities. These investments are recorded at fair value with the related unrealized gains and
losses included in accumulated other comprehensive income (loss), a component of stockholders’
equity, net of tax. The unrealized gain (loss), net of taxes, was $5 and $(5) as of June 30, 2011
and December 31, 2010, respectively. Realized gains and losses on the sale of these investments are
determined using the specific identification method. There were no realized gains or losses during
the three or six months ended June 30, 2011 or 2010.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Short and long-term investments consisted of the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>June 30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Estimated</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Losses</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
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<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Short and long-term investments:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Municipal bonds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,560</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">26</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(18</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">32,568</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total short and long-term investments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">32,560</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">26</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(18</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">32,568</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14" style="border-bottom: 1px solid #000000"><b>December 31, 2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Unrealized</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Estimated</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Cost</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Gains</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Losses</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Fair Value</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Short and long-term investments:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Government agency bonds
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,008</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">—</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">2,009</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Municipal bonds
</div></td>
<td> </td>
<td> </td>
<td align="right">15,550</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">15,541</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total short and long-term investments
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">17,558</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(11</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">17,550</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company had seven debt securities in an unrealized loss position at June 30, 2011. Six of
these securities have been in such a position for less than 12 months; the unrealized loss on those
securities was approximately $17 and the fair value was $13.1 million. As of June 30, 2011, the
Company does not consider these investments to be other-than-temporarily impaired. One of these
securities has been in such a position for more than 12 months and may be permanently impaired.
The unrealized loss on that security was approximately $1 and the fair value was $2.0 million.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Municipal bonds have contractual maturity dates within 18 months. All income generated from
these investments is recorded as interest income.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>5. Acquisitions</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">On April 26, 2011 the Company acquired the websites, product offerings, and events associated
with Computer Weekly and its sister channel-targeted brand, MicroScope, from Reed Business
Information Limited for $2.0 million in cash plus the payment of approximately $0.4 million in
restructuring costs relating to redundancy costs of Computer Weekly employees not brought over as
part of the acquisition.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with this acquisition, the Company’s preliminary
allocation of purchase price is approximately $40 of net tangible
assets, $90 of goodwill and $1.9 million of intangible assets related to customer
relationships, a member database, a non-compete agreement and trade names with estimated useful
lives ranging from two to five years.
</div>
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</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The estimated fair value of the $1.9 million of acquired intangible assets is assigned as
follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="72%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Estimated Fair</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Useful Life</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value (in 000’s)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer relationship
</div></td>
<td> </td>
<td colspan="3" align="center">60 months</td>
<td> </td>
<td align="left">$</td>
<td align="right">825</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Member database
</div></td>
<td> </td>
<td colspan="3" align="center">60 months</td>
<td> </td>
<td> </td>
<td align="right">512</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-compete agreement
</div></td>
<td> </td>
<td colspan="3" align="center">24 months</td>
<td> </td>
<td> </td>
<td align="right">100</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Trade name
</div></td>
<td> </td>
<td colspan="3" align="center">60 months</td>
<td> </td>
<td> </td>
<td align="right">430</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total intangible assets
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,867</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company engaged a third party valuation specialist to assist management in determining the
fair value of the intangible assets of the Computer Weekly and MicroScope businesses. To value the
customer relationship assets, an income approach was used, specifically a variation of the
discounted cash-flow method known as the multi-period excess earnings method. The projected net
cash flows were discounted using a discount rate of 28.3%. To value the member database, a
replacement cost approach was used, specifically a calculation of costs to acquire new members
based on the cost to acquire new members in 2010 divided by new members acquired. Additionally,
the present value of the sum of projected lost profits was added to the calculated replacement cost
to calculate the total fair value of the member database asset. To value the non-compete agreement,
a comparative business valuation method was used. Based on a non-compete term of 24 months,
management projected net cash flows for the Company with and without the non-compete agreement in
place. The present value of the sum of the difference between the net cash flows with and without
the non-compete agreement in place was calculated, based on a discount rate of 28.3%. To value the
trade name intangible asset, a relief from royalty method was used to estimate the pre-tax royalty
savings to the Company related to the Computer Weekly and MicroScope trade names. The projected
net cash flows from the pre-tax royalty savings were tax affected using an effective rate of 26%
and then discounted using a discount rate of 28.3% to calculate the value of the trade name
intangible asset.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 6 - us-gaap:IntangibleAssetsDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>6. Intangible Assets</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets subject to amortization as of June 30, 2011 and December 31, 2010 consist of
the following:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>As of June 30, 2011</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Estimated</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Useful Lives</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>(Years)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 0px solid #000000"><b> </b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>(Unaudited)</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 0px solid #000000"> </td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer, affiliate
and advertiser
relationships
</div></td>
<td> </td>
<td align="center" valign="top">1 - 9</td>
<td> </td>
<td align="left">$</td>
<td align="right">8,958</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(3,846</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">5,112</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Developed websites
</div></td>
<td> </td>
<td align="center" valign="top">3 - 6</td>
<td> </td>
<td> </td>
<td align="right">5,400</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,750</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,650</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademark, trade name
and domain name
</div></td>
<td> </td>
<td align="center" valign="top">1 - 7</td>
<td> </td>
<td> </td>
<td align="right">1,938</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(812</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">1,126</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary user
information database
and Internet traffic
</div></td>
<td> </td>
<td align="center" valign="top">3 - 5</td>
<td> </td>
<td> </td>
<td align="right">5,207</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,152</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,055</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-compete agreements
</div></td>
<td> </td>
<td align="center" valign="top">1 - 3</td>
<td> </td>
<td> </td>
<td align="right">544</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(279</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">265</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total intangible assets
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">22,047</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(11,839</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">10,208</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="11%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10" style="border-bottom: 1px solid #000000"><b>As of December 31, 2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Estimated</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Gross</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 0px solid #000000"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center"><b>Useful Lives</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Carrying</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Accumulated</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" style="border-bottom: 1px solid #000000"><b>(Years)</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amount</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Amortization</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Net</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Customer, affiliate
and advertiser
relationships
</div></td>
<td> </td>
<td align="center" valign="top">1 - 9</td>
<td> </td>
<td align="left">$</td>
<td align="right">12,879</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(7,654</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">5,225</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Developed websites
</div></td>
<td> </td>
<td align="center" valign="top">3 - 6</td>
<td> </td>
<td> </td>
<td align="right">5,400</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,300</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,100</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Trademark, trade name
and domain name
</div></td>
<td> </td>
<td align="center" valign="top">1 - 7</td>
<td> </td>
<td> </td>
<td align="right">2,373</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,526</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">847</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Proprietary user
information database
and Internet traffic
</div></td>
<td> </td>
<td align="center" valign="top">3 - 5</td>
<td> </td>
<td> </td>
<td align="right">5,400</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(3,354</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">2,046</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Non-compete agreements
</div></td>
<td> </td>
<td align="center" valign="top">1 - 3</td>
<td> </td>
<td> </td>
<td align="right">1,573</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(1,322</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">251</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total intangible assets
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td align="left">$</td>
<td align="right">27,625</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(17,156</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td align="left">$</td>
<td align="right">10,469</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="center" valign="top"> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Intangible assets are amortized over their estimated useful lives, which range from one to
nine years, using methods of amortization that are expected to reflect the estimated pattern of
economic use. The remaining amortization
expense will be recognized over a weighted-average period of approximately 2.36 years.
Amortization expense was $1.0 and $1.1 million for the three month periods ended June 30, 2011 and
2010, respectively, and $2.1 million and $2.3 million for the six months ended June 30, 2011 and
2010, respectively. Amortization expense is recorded within operating expenses as the intangible
assets consist of customer-related assets and website traffic that the Company considers to be in
support of selling and marketing activities. The Company wrote off $7.5 million of fully amortized
intangible assets in the first half of 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company expects amortization expense of intangible assets to be as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Amortization</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Years Ending December 31:</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Expense</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td align="center" colspan="2">(Unaudited)</td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011 (July 1st — December 31st)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,887</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">3,326</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">1,789</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">1,394</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">1,147</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Thereafter
</div></td>
<td> </td>
<td> </td>
<td align="right">665</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">10,208</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 7 - us-gaap:EarningsPerShareTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>7. Net Income (Loss) Per Common Share</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A reconciliation of the numerator and denominator used in the calculation of basic and diluted
net income (loss) per common share is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>For the Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>For the Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Numerator:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Net income (loss)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,818</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">446</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,743</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,894</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom"><!-- Blank Space -->
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Denominator:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Basic:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Weighted average shares of common stock
outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">38,331,895</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,943,465</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38,136,159</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,711,730</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Diluted</b>:
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Weighted average shares of common stock
outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">38,331,895</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,943,465</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">38,136,159</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,711,730</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Effect of potentially dilutive shares(1)
</div></td>
<td> </td>
<td> </td>
<td align="right">2,358,984</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,109,169</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,726,364</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">—</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Total weighted average shares of common
stock outstanding
</div></td>
<td> </td>
<td> </td>
<td align="right">40,690,879</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">45,052,635</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">40,862,523</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">42,711,730</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net Income (Loss) Per Common Share:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Basic net income (loss) per common share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.05</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.01</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.05</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.04</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px"><b>Net Income (Loss) Per Common Share:</b>
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Diluted net income (loss) per common share
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">0.04</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.01</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">0.04</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(0.04</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left">
<div style="font-size: 3pt; margin-top: 10pt; width: 18%; border-top: 1px solid #000000"> 
</div>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>In calculating diluted earnings per share, shares related to
outstanding stock options, unvested restricted stock awards and
warrants were excluded for the six months ended June 30, 2010 because
they were anti-dilutive.</td>
</tr>
</table>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 8 - us-gaap:DebtDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>8. Bank Term Loan Payable</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has a $5.0 million revolving credit facility that matures on August 30, 2011.
Unless earlier payment is required by an event of default, all principal and unpaid interest will
be due and payable on August 30, 2011. At the Company’s option, the Revolving Credit Facility bears
interest at either the Prime Rate less 1.00% or the London Interbank Offered Rate (“LIBOR”) plus
the applicable LIBOR margin. The applicable LIBOR margin is based on the ratio of total funded debt
to earnings before interest, other income and expense, income taxes, depreciation, and amortization
(“EBITDA”) for the preceding four fiscal quarters. As of June 30, 2011, the applicable LIBOR
margin, which was the operative rate during the quarter ended June 30, 2011, was 1.25%.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company is also required to pay an unused line fee on the daily unused amount of its
Revolving Credit Facility at a per annum rate based on the ratio of total funded debt to EBITDA for
the preceding four fiscal quarters. As of June 30, 2011, unused availability under the Revolving
Credit Facility totaled $3.5 million and the per annum unused line fee rate was 0.20%.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Borrowings under the Credit Agreement are collateralized by a security interest in
substantially all assets of the Company. Covenants governing the Credit Agreement include the
maintenance of certain financial ratios. At June 30, 2011 the Company was in compliance with all
covenants under the Credit Agreement.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company is currently in negotiations to renew its Revolving Credit Facility when it
becomes due.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">At June 30, 2011 and December 31, 2010 there were no amounts outstanding under this revolving
loan agreement. There was a $1.5 million standby letter of credit related to the Company’s
corporate headquarters lease that was outstanding at June 30, 2011, bringing our available
borrowings on the $5.0 million facility to $3.5 million.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 9 - us-gaap:CommitmentsAndContingenciesDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>9. Commitments and Contingencies</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Operating Leases</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company conducts its operations in leased office facilities under various non-cancelable
operating lease agreements that expire through March 2020. Future minimum lease payments under the
Company’s non-cancelable operating leases at June 30, 2011 are as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="86%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Minimum Lease</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Years Ending December 31:</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Payments</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2011 (July 1st — December 31st)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">2,010</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2012
</div></td>
<td> </td>
<td> </td>
<td align="right">4,084</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2013
</div></td>
<td> </td>
<td> </td>
<td align="right">3,170</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">2014
</div></td>
<td> </td>
<td> </td>
<td align="right">3,172</td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">2015
</div></td>
<td> </td>
<td> </td>
<td align="right">3,191</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Thereafter
</div></td>
<td> </td>
<td> </td>
<td align="right">13,957</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">29,584</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company has an irrevocable standby letter of credit outstanding in the aggregate amount of
$1.5 million. This letter of credit supports the lease the Company entered into in 2009 for its
corporate headquarters. This letter of credit extends, subject to certain reductions, annually
through February 28, 2020 unless notification of termination is received.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Net Worth Tax Contingency</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In late March 2010, the Company received a letter from the Department of Revenue of the
Commonwealth of Massachusetts (the “MA DOR”) requesting documentation demonstrating that TechTarget
Securities Corporation (“TSC”), a wholly-owned subsidiary of the Company, has been classified by
the MA DOR as a Massachusetts security corporation. Following subsequent correspondence with the
MA DOR and a settlement conference on March 22, 2011, the Company received on July 16, 2011 a
Notice of Assessment from MA DOR for 2006 and 2007 in the amount of approximately $198 (which
amount included all interest and penalties to date) with respect to additional excise taxes on net
worth related to TSC. Based on the Company’s previous assessment that it was probable that the MA
DOR would require an adjustment to correct TSC’s tax filings such that it will be treated as a
Massachusetts business corporation for the applicable years, for the year ended December 31, 2010,
the Company recorded a liability of approximately $200, representing its best estimate at that time
of the potential net worth tax exposure. The tax benefits available to a Massachusetts security
corporation are comprised of (i) lower income tax rate (1.32% vs. 9.5%) and (ii) exemption from the
0.26% excise tax on net worth. The Company intends to dispute the assessment and believes it has
meritorious defenses which it intends to vigorously assert. There were no changes to the net worth
tax reserve assessment as of June 30, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Litigation</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">From time to time and in the ordinary course of business, the Company may be subject to
various claims, charges, and litigation. At June 30, 2011 and December 31, 2010, the Company did
not have any pending claims, charges, or litigation that it expects would have a material adverse
effect on its consolidated financial position, results of operations, or cash flows.
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 10 - us-gaap:ComprehensiveIncomeNoteTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>10. Comprehensive Income (Loss)</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Comprehensive income (loss) includes all changes in equity during a period, except those
resulting from investments by stockholders and distributions to stockholders. For the three and six
months ended June 30, 2011 and 2010 the Company’s comprehensive income (loss) is as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>For the</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>For the</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Net income (loss)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,818</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">446</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,743</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,894</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Other comprehensive income (loss):
</div></td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized gain (loss) on investments (net of tax
effect of $2, $(3), $4 and $(32), respectively)
</div></td>
<td> </td>
<td> </td>
<td align="right">5</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(4</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">9</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(45</td>
<td nowrap="nowrap">)</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:30px; text-indent:-15px">Unrealized (loss) gain on foreign currency exchange
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(101</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">8</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(84</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(6</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:45px; text-indent:-15px">Other comprehensive (loss) income
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(96</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(75</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(51</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Total comprehensive income (loss)
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">1,722</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">450</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">1,668</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left">$</td>
<td align="right">(1,945</td>
<td nowrap="nowrap">)</td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 11 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>11. Stock-Based Compensation</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Stock Option Plans</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In September 1999, the Company approved a stock option plan (the “1999 Plan”) that provides
for the issuance of up to 12,384,646 shares of common stock incentives. The 1999 Plan provides for
the granting of incentive stock options (“ISOs”), nonqualified stock options (“NSOs”), and stock
grants. These incentives may be offered to the Company’s employees, officers, directors,
consultants, and advisors, as defined. ISOs may not be granted at less than fair market value on
the date of grant, as determined by the Company’s Board of Directors (the “Board”). Each option
shall be exercisable at such times and subject to such terms as determined by the Board; grants
generally vest over a four year period and expire no later than ten years after the grant date.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In April 2007, the Board approved the 2007 Stock Option and Incentive Plan (the “2007 Plan”),
which was approved by the stockholders and became effective upon the consummation of the Company’s
IPO in May 2007. Effective upon the consummation of the IPO, no further awards were made pursuant
to the 1999 Plan, but any outstanding awards under the 1999 Plan will remain in effect and will
continue to be subject to the terms of the 1999 Plan. The 2007 Plan allows the Company to grant
ISOs, NSOs, stock appreciation rights, deferred stock awards, restricted stock and other awards.
Under the 2007 Plan, stock options may not be granted at less than fair market value on the date of
grant, and grants generally vest over a four year period. Stock options granted under the 2007 Plan
expire no later than ten years after the grant date. The Company has reserved an aggregate of
2,911,667 shares of common stock for issuance under the 2007 Plan plus an additional annual
increase to be added automatically on January 1 of each year, beginning on January 1, 2008, equal
to the lesser of (a) 2% of the outstanding number of shares of common stock (on a fully-diluted
basis) on the immediately preceding December 31 and (b) such lower number of shares as may be
determined by the Company’s compensation committee. The number of shares available for issuance
under the 2007 Plan is subject to adjustment in the event of a stock split, stock dividend or other
change in capitalization. Generally, shares that are forfeited or canceled from awards under the
2007 Plan also will be available for future awards. In addition, shares subject to stock options
returned to the 1999 Plan, as a result of their expiration, cancellation or termination, are
automatically made available for issuance under the 2007 Plan. As of June 30, 2011 a total of
1,290,238 shares were available for grant under the 2007 Plan.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Accounting for Stock-Based Compensation</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value
of an award. The Company calculated the fair values of the options granted using the following
estimated weighted-average assumptions:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>Three Months Ended June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected volatility
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">79</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">78</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected term
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td colspan="3" align="right">6.25 years</td>
<td> </td>
<td colspan="4" align="right">6.25 years</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Risk-free interest rate
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.30</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">2.85</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Expected dividend yield
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.00</td>
<td nowrap="nowrap">%</td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">0.00</td>
<td nowrap="nowrap">%</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Weighted-average grant date fair value per share
</div></td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">*</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.16</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">3.89</td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">*</td>
<td> </td>
<td>There were no grants during the second quarter of 2011 or 2010.</td>
</tr>
</table>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As there was no public market for the Company’s common stock prior to the Company’s IPO in May
2007, and limited historical information on the volatility of its common stock since the date of
the Company’s IPO, the Company determined the volatility for options granted in the six months
ended June 30, 2011 and 2010 based on an analysis of the historical volatility of the Company’s
stock and reported data for a peer group of companies that issued options with substantially
similar terms. The expected volatility of options granted has been determined using a weighted
average of the historical volatility of the Company’s stock and the peer group of companies for a
period equal to the expected life of the option. The expected life of options has been determined
utilizing the “simplified” method. The risk-free interest rate is based on a zero coupon United
States treasury instrument whose term is consistent with the expected life of the stock options.
The Company has not paid and does not anticipate paying cash dividends on its shares of common
stock; therefore, the expected dividend yield is assumed to be zero. The Company applied estimated annual forfeiture rates of 3.6% and
2% for the six months ended June 30, 2011 and 2010, respectively based on
its historical forfeiture experience in determining the expense
recorded in those periods.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">A summary of the stock option activity under the Company’s stock option plan for the six
months ended June 30, 2011 is presented below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b> </b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Average</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Remaining</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Options</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Exercise Price</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b> Contractual</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Year-to-Date Activity</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Outstanding</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Per Share</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Term in Years</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Intrinsic Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Options outstanding at December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">7,095,090</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.41</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">20,000</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.37</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Exercised
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(189,933</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">5.82</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(43,750</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">5.70</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Cancelled
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(7,282</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">10.84</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options outstanding at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">6,874,125</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.43</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.2</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,880</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Options exercisable at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">5,878,463</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.45</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4.6</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">10,268</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Options vested or expected to vest at
June 30, 2011 (1)
</div></td>
<td> </td>
<td> </td>
<td align="right">6,797,658</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.43</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">5.1</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">11,756</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left">
<tr style="font-size: 6pt">
<td width="3%"> </td>
<td width="1%"> </td>
<td width="96%"> </td>
</tr>
<tr valign="top">
<td nowrap="nowrap" align="left">(1)</td>
<td> </td>
<td>In addition to the vested options, the Company expects a portion of the unvested options to
vest at some point in the future. Options expected to vest is calculated by applying an
estimated forfeiture rate to the unvested options.</td>
</tr>
</table>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">During the six months ended June 30, 2011 and 2010, the total intrinsic value of options
exercised (i.e. the difference between the market price at exercise and the price paid by the
employee to exercise the options) was $425 and $333, respectively, and the total amount of cash
received from exercise of these options was $1,106 and $272, respectively. The total grant date
fair value of stock options granted after January 1, 2006 that vested during the six months ended
June 30, 2011 and 2010 was $1.2 million and $3.0 million, respectively.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Restricted Stock Awards</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Restricted stock awards are valued at the market price of a share of the Company’s common
stock on the date of grant. A summary of the restricted stock award activity under the 2007 Stock
Plan for the six months ended June 30, 2011 is presented below:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="58%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Weighted-Ave.</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Grant Date</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"> </td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Date Fair Value</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2"><b>Aggregate Intrinsic</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td nowrap="nowrap" align="left" style="border-bottom: 1px solid #000000"><b>Year-to-Date Activity</b></td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Shares</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value Per Share</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>Value</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="10"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonvested outstanding at December 31, 2010
</div></td>
<td> </td>
<td> </td>
<td align="right">2,693,453</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">5.92</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Granted
</div></td>
<td> </td>
<td> </td>
<td align="right">85,217</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">7.27</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Vested
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(392,715</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">4.80</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">Forfeited
</div></td>
<td> </td>
<td nowrap="nowrap" align="left"> </td>
<td align="right">(99,640</td>
<td nowrap="nowrap">)</td>
<td> </td>
<td> </td>
<td align="right">7.28</td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Nonvested outstanding at June 30, 2011
</div></td>
<td> </td>
<td> </td>
<td align="right">2,286,315</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">6.23</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">17,307</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
<!-- Folio -->
<!-- /Folio -->
</div>
<!-- PAGEBREAK -->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The total grant-date fair value of restricted stock awards that vested during the six months
ended June 30, 2011 and 2010 was $1.9 million and $3.0 million, respectively.
</div>
</div>
<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 12 - us-gaap:StockholdersEquityNoteDisclosureTextBlock-->
<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>12. Stockholders’ Equity</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Reserved Common Stock</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As of June 30, 2011, the Company has reserved 11,209,990 shares of common stock for options
outstanding and available for grant under stock option plans.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Warrants</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with an acquisition in May 2000, the Company issued to the seller a warrant to
purchase 40,625 shares of common stock at a price of $2.36 per share. In 2007, the seller exercised
warrants to purchase 30,981 shares of common stock using the conversion rights in the warrants. As
result of the exercise using the conversion rights, the Company issued 26,024 shares of common
stock to the seller and cancelled the 4,957 shares received in lieu of payment of the exercise
price. In 2008, the seller exercised additional warrants to purchase 8,375 shares of common stock
using the conversion rights in the warrants. As result of the exercise using the conversion rights,
the Company issued 6,886 shares of common stock to the seller and cancelled the 1,489 shares
received in lieu of payment of the exercise price. The balance of the unexercised portion of the
warrant expired in the second quarter of 2010.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>13. Income Taxes</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company’s effective tax rate was 51% and (82)% for the six months ended June 30, 2011 and
2010, respectively. The provision for income taxes for the six months ended June 30, 2011 includes
a discrete tax expense of $75 related to a state tax assessment for a prior period. The effective
tax rate excluding the discrete tax expense was 50% for the six months ended June 30, 2011. The
change in the effective tax rate excluding the discrete tax expense was as a result of applying the
provision of ASC 740, <i>Income Taxes</i>, as it relates to interim periods. For the six months ended
June 30, 2011, the Company calculated the provision for income taxes using a forecasted tax rate
for the year ended December 31, 2011<i>. </i>For the six months ended June 30, 2010, the Company
calculated the benefit from income taxes using a period-to-date approach. The Company recognized
interest and penalties totaling $8 in income tax expense in the six months ended June 30, 2011.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">For the year ended December 31, 2010, the Company had recorded a tax reserve of approximately
$400 for the potential state income tax liability arising from the difference between the income
tax rates applicable for security corporations and business corporations in Massachusetts, relating
to the matter described in Note 9. In connection with such matter, on July 21, 2011, the Company
received a Notice of Assessment from MA DOR for 2006 and 2007 in the amount of approximately $345
(which amount included all interest and penalties to date) with respect to additional income taxes
related to TechTarget, Inc. The Company increased the reserve assessment as of June 30, 2011 to
$422 in order to reflect additional interest accrued. The Company intends to dispute the assessment
and believes it has meritorious defenses which it intends to vigorously assert.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Tax years 2007 through 2010 are subject to examination by the federal and state taxing
authorities. There are no income tax examinations currently in process with the exception of the
TSC matter noted above related to the MA DOR.
</div>
</div>
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<div style="font-family: 'Times New Roman',Times,serif; margin-left: 0in; ">
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b>14. Segment Information</b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company views its operations and manages its business as one operating segment based on
factors such as how the Company manages its operations and how its CEO and President review results
and make decisions on how to allocate resources and assess performance.
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt"><b><i>Geographic Data</i></b>
</div>
<div align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Net sales to unaffiliated customers by geographic area were as follows:
</div>
<div align="center">
<table style="font-size: 10pt; text-align: left" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<tr valign="bottom">
<td width="44%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
<td width="3%"> </td>
<td width="1%"> </td>
<td width="9%"> </td>
<td width="1%"> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Three Months Ended</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6"><b>Six Months Ended</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="6" style="border-bottom: 1px solid #000000"><b>June 30,</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2011</b></td>
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="2" style="border-bottom: 1px solid #000000"><b>2010</b></td>
<td> </td>
</tr>
<tr style="font-size: 10pt" valign="bottom">
<td> </td>
<td> </td>
<td nowrap="nowrap" align="center" colspan="14"><b>(Unaudited)</b></td>
<td> </td>
</tr>
<!-- End Table Head -->
<!-- Begin Table Body -->
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">North America
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">25,876</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">23,881</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,666</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">43,762</td>
<td> </td>
</tr>
<tr valign="bottom">
<td>
<div style="margin-left:15px; text-indent:-15px">International
</div></td>
<td> </td>
<td> </td>
<td align="right">2,226</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">1,192</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">4,002</td>
<td> </td>
<td> </td>
<td> </td>
<td align="right">2,354</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 1px solid #000000"> </td>
<td> </td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td>
<div style="margin-left:15px; text-indent:-15px">Total
</div></td>
<td> </td>
<td align="left">$</td>
<td align="right">28,102</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">25,073</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">50,668</td>
<td> </td>
<td> </td>
<td align="left">$</td>
<td align="right">46,116</td>
<td> </td>
</tr>
<tr style="font-size: 1px">
<td>
<div style="margin-left:15px; text-indent:-15px"> 
</div></td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
<td> </td>
<td nowrap="nowrap" colspan="2" align="right" style="border-top: 3px double #000000"> </td>
<td> </td>
</tr>
<!-- End Table Body -->
</table>
</div>
</div>
46000
20000
42000
20000
174000
86000
132000
62000
2584000
1359000
1326000
682000
316000
155000
206000
100000
3464000
1535000
2240000
1082000
Amounts include stock-based compensation expense as follows: