You should read the following discussion together with our unaudited condensed consolidated financial statements and notes to those financial statements, which are included in this report. This report contains forward-looking statements made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words "anticipates," "intends," "expects," "could," "should," "plans," "believes," "estimates" or words or phrases of similar import generally identify forward-looking statements. You are cautioned that forward-looking statements are subject to risks, trends and uncertainties that could cause actual results, performance or achievements to differ materially from those expressed in any forward-looking statements. Important factors that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by those statements include, but are not limited to, the following: (i) the impact of the economy on dining activity, (ii) our inability to attract and retain merchants,
(iii) our susceptibility to restaurant credit risk and the risk that its allowance for losses related to restaurant credit risk in connection with dining credits may prove inadequate, (iv) our dependence upon its relationships with payment card issuers, transaction processors, presenters and aggregators, (v) a security breach that results in a payment card issuer re-issuing a significant number of registered payment cards, (vi) changes to payment card association rules and practices, (vii) our dependence on its relationships with airlines and other reward program partners for a significant number of members, (viii) the concentration of a significant amount of our rewards currency in one industry group, the airline industry, (ix) adverse weather conditions affecting dining activity, (x) our minimum purchase obligations and performance requirements,
(xi) our inability to attract and retain active members, (xii) factors causing our operating results to fluctuate over time, (xiii) our ability to obtain sufficient cash to operate its business, (xiv) changes in our programs that affect the rate of rewards, (xv) our inability to maintain an adequately-staffed sales force, (xvi) our inability to maintain an appropriate balance between the number of members and the number of participating merchants in each market,
(xvii) network interruptions, processing interruptions or processing errors,
(xviii) susceptibility to a changing regulatory environment, (xix) increased operating costs or loss of members due to privacy concerns of our program partners, payment card processors and the public, (xx) the failure of our security measures, (xxi) the loss of key personnel, (xxii) increasing competition, and (xxiii) a shift toward Marketing Services Program that may cause revenues to decline. We undertake no obligation to, and expressly disclaim any such obligation to, update or revise any forward-looking statements to reflect changed assumptions, the occurrence of anticipated or unanticipated events or changes to future results over time or otherwise, except as required by law. See the risk factors included as Part I, Item 1A "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2008 for a more detailed discussion of the foregoing and other factors that could cause actual results to differ materially from those included in the forward-looking statements and that, among others, should be considered in evaluating our outlook.

OVERVIEW

We operate the leading dining rewards programs in North America by marketing our participating restaurants to members of these programs and by providing incentives to members to dine at these restaurants. In addition to operating the dining rewards program of leading airline frequent flyer programs, clubs and other affinity organizations, we offer our own dining rewards program, iDine®, through our website, www.idine.com. In 2009, we are celebrating our 25th year in business.

We primarily offer two programs to restaurants - our Marketing Services Program and Marketing Credits Program. In both the Marketing Services and Marketing Credits Programs, we market participating restaurants principally through our internet, email and mobile smartphone applications as well as various social media outlets. Our programs are designed to increase the frequency of dining and the amount spent by members at participating restaurants by providing incentives to dine at these restaurants, including airline miles, college savings rewards, reward program points, and cash back benefits. As members spend more at participating restaurants, the amount of incentives they receive for dining increases. We also offer reporting and customer feedback to participating restaurants and provide aggregate data regarding members' activity and feedback through comments and ratings gathered from surveys. Bars and clubs also participate in our programs, and for purposes of describing our business, are included when the terms "restaurants" or "merchants" are used.

For restaurants that participate in the Marketing Credits Program, in addition to providing the marketing, incentives and reporting described above, we purchase a portion of future member transactions in advance and at a discount. These merchants are typically seeking additional liquidity. In discussing our business, we use the term "dining credits" to refer to the portion of future member transactions that we purchase in the Marketing Credits Program. Our Marketing Credits Program contracts include a separate fee for marketing, reporting on member activity, member feedback and dining rewards. We include all components of the Marketing Credits Program, including the payment for marketing, reporting on member activity, member feedback and dining rewards programs, in Marketing Credits Program sales and net revenues because we do not purchase, and a merchant cannot sell the dining credits without marketing services. In addition, we analyze our business in this manner.

We recognize revenue only if a member dines at a participating restaurant when rewards are available and pays using a credit or debit card (also referred to as a payment card) that the member has registered with us. Our revenue per transaction is equal to a percentage of the member's total dining transaction amount. These revenues are applied to recover our costs where we have purchased a portion of future member transactions; provide rewards to members; cover our selling, marketing, general and administrative expenses; and generate operating income that provides a return for our stockholders.

Throughout 2009, we have been focused strategically on evolving into the leading provider of marketing services to the restaurant industry while managing the risks in our dining credits portfolio and minimizing our operating expenses. At the same time that we implemented more conservative dining credits purchasing policies this past year, we also sought to improve our marketing services by opening our network to increase interaction among members, merchants and partners. We believe that opening the network and focusing on marketing services will provide us with more opportunities in 2010 and beyond. As a result of these efforts, we have increased the number of members who receive our email marketing and the number of marketing emails that we deliver. The number of completed post-dine surveys continues to increase. We also introduced a system that allows merchants to respond to member feedback from post-dine surveys. These improvements benefit participating restaurants in both the Marketing Services and Marketing Credits Programs.

The improvements in our marketing services have contributed to the growth in our Marketing Services Program. We also increased the focus of our sales force on the Marketing Services Program and made price adjustments at the end of 2008 to meet the needs of merchants in a difficult economic environment. Marketing Services Program merchants increased by 1,895, or 57.3%, over the end of the third quarter of 2008, and Marketing Services Program sales for the third quarter of 2009 were 60.6% higher than the same period in 2008. The growth in the Marketing Services Program is attractive because it does not require us to put capital at risk and its net revenues as a percentage of sales are higher than in the Marketing Credits Program.

Our Marketing Credits Program continues to be a significant part of our business. In order to manage the risk in our dining credits portfolio, we implemented more conservative dining credits purchasing policies during mid-2008 in light of the significant economic challenges and the credit uncertainty facing both the restaurant industry and consumers. These more conservative policies were aimed at generally reducing the amount of dining credits we purchased from individual restaurants and shortening the estimated months to consume the dining credits purchased, which we refer to as the usage period. These policies improved the risk profile of our dining credits portfolio but resulted in fewer restaurants participating in the Marketing Credits Program and a smaller dining credits balance. Marketing Credits Program merchants decreased by 1,529, or 23.7%, as of September 30, 2009 from September 30, 2008. Our net dining credits portfolio decreased to $55,125 as of September 30, 2009 from $82,389 as of September 30, 2008 and $75,663 as of December 31, 2008. While the net dining credits portfolio balance was smaller when compared to the prior year, it was relatively flat as compared to the second quarter of 2009, having decreased only $1,493. The composition of our dining credits portfolio has changed over time as dining credits that we purchased under previous purchasing policies were consumed and replaced by dining credits purchased under our more conservative policies. We believe that our dining credits portfolio substantially reflects our more conservative policies as evidenced by the reduction in the provision for losses expense. Our estimated months to consume dining credits net of the allowance for doubtful accounts, which we refer to as the net dining credits usage period, decreased to 6.5 months at September 30, 2009 from 7.5 months at September 30, 2008 and December 31, 2008. Although our net dining credits portfolio has decreased 33.1% between September 30, 2009 and 2008, sales decreased 13.8% for the nine months ended September 30, 2009 compared to the same period in the prior year partially due to a $5,914 or 33.1% increase in sales in the Marketing Services Program.

We continually evaluate our dining credits purchase policies by monitoring the performance of our dining credits portfolio and observing current economic trends facing the restaurant industry. During the second quarter of 2009, we began to observe the amount of members spend at participating restaurants stabilize. Based on our observations regarding member spending at our restaurants and our analysis of the performance of individual merchants in our dining credits portfolio, we modified our approach to purchasing dining credits in the first half of 2009 to increase the amount of dining credits we purchase from restaurants that meet certain criteria relating to credit, sales volume and length of time in our program. We generally expect to continue our current dining credit purchasing policies, although in response to economic trends, we may adjust our approach with our dining credits purchases in the future in order to manage risk in our dining credits portfolio. If we choose to purchase more dining credits from merchants who we identify as acceptable risk, it could result in an increase in the size of our dining credits portfolio and use of cash. If we become more conservative it would likely result in a further decrease in the size of our dining credits portfolio and lower future revenues. Our provision for losses may also increase or decrease as a result of the performance of our portfolio and of our assessment of the economy.

During 2009, we further reduced ongoing operating expenses, including marketing expenses. However, we continue to specifically avoid cost reductions that would adversely impact our sales force. While we see the current environment as challenging, we also see an opportunity to continue to add more restaurants to our programs. We increased the total number of restaurants in our program to 10,121 at September 30, 2009, as compared to 9,755 at September 30, 2008. The increase in merchants is an indication of improved sales force productivity, driven in part by the maturity of our sales force. We expect to continue our investment in the sales force and intend to maintain adequate staffing levels.

We have focused on these strategic priorities because we believe these priorities will contribute to growth and improve our liquidity and stockholder value. The implementation of the strategy to date has resulted in consistent, positive operating cash flow, improved return on assets and profitability despite lower sales than a year ago. During the first half of 2009, we generated positive cash from operations, primarily as a result of the purchase of fewer dining credits during the period, but also through operations including the performance of the portfolio. In the third quarter of 2009, we continued to generate positive cash from operations, but the reduction in the amount of dining credits that we purchased was no longer the primary contributor of this cash generation. Our net dining credits portfolio decreased $1,493 during the quarter compared to cash generated from operations during the quarter of $6,479. We currently do not have any borrowings outstanding under our credit facility and continue to operate on a debt-free basis.

The steps we took in 2009 have also provided the liquidity to implement a $5,000 stock repurchase plan and declare a special cash dividend of $2.00 per common share. The special cash dividend of $2.00 per common share was paid on October 22, 2009 to stockholders of record at the close of business on October 15, 2009. We funded the $17,435 total dividend amount from existing cash balances. The stock repurchase authorization does not have an expiration date and may be limited, suspended or terminated at any time without prior notice. Shares may be purchased from time to time on the open market or through private transactions, pursuant to Rule 10b5-1 trading plans or other available means. During the nine months ended September 30, 2009, we repurchased 443 shares for $4,138. Repurchases are dependent on market conditions and other factors. The purchases were funded from cash and cash equivalents and the repurchased shares are maintained as treasury shares for possible future use. Any additional shares we may purchase are expected to be funded through cash from operations and cash equivalents.

On July 6, 2009, we completed a one-for-three reverse split of our common stock in which every three shares of our common stock was exchanged for one share of our common stock, as described further in Note 1 of this Quarterly Report on Form 10-Q.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of the financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to the allowance for losses, the valuation allowance, if any, for net deferred tax assets, goodwill and revenue recognition. Our estimates are based on historical experience and on various other assumptions we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Allowance for Losses

We provide allowances for dining credits losses and accounts receivables based on our estimate of losses that would result from the inability of participating merchants to remain in business or our merchant's unwillingness to honor their obligations relating to dining credits and accounts receivables. If the financial condition of our merchant base were to deteriorate beyond our expectations, resulting in participating merchants' inability to provide food, beverage, goods and services to members thereby reducing the redemption of dining credits, or if merchants are unwilling or otherwise unable to honor their obligations relating to dining credits or accounts receivable in greater numbers than we expect, additional provision for losses may be required.

During the second quarter of 2008, we refined our methodology used to estimate losses in dining credits and accounts receivable. Prior to the second quarter of 2008, our methodology was primarily based upon the age of the portfolio as calculated from sales from the preceding quarter. We applied estimated loss percentages to the aged portfolio based on the estimated time remaining on each deal. We also provided for specifically identified accounts and for dining credits balances that were large or slow moving. Since the beginning of 2007, however, we have been collecting additional historical information on merchant account balances. With this additional data, during the second quarter of 2008, we refined our estimation method and now use this information to monitor accounts, track historical write-offs, and fund new accounts. We now apply a reserve rate to accounts based upon additional characteristics, such as whether the account has been referred for legal collection, the date of the last payment received from the merchant, whether our attempt to debit the merchant's bank account for payments due to us has been rejected, the merchant's commercial credit score, and the aging of the account. The reserve rate for each account is based upon historical charge-off rates of accounts with similar characteristics. We also provide for specifically identified accounts and for dining credit balances that are large or slow moving as we did previously. The refined methodology was applied to our entire portfolio and resulted in approximately $1,500 of additional provision for losses expense during 2008. Losses are reduced by recoveries of dining credits previously charged off. Account balances are charged off against the allowance once we conclude that a merchant is unwilling or unable to honor their obligation relating to dining credits. Subsequent to the account being charged off, we may continue to pursue recovery efforts. As of the beginning of 2008, we updated our write-off policy to further define when an account should be written-off.

We will continue to review our reserve rates on a regular basis based upon historical charge-off rates and may adjust reserve rates based on changes in the nature of our business, risk considerations, economic conditions, actual charge-off rates or other factors. We also adjust our dining credits purchases based upon trends we see in the industry. As discussed above in this section under Overview, in reaction to the decline in consumer spending and increased economic and credit uncertainty we saw at the end of 2007 and throughout 2008, we implemented more conservative dining credits purchasing policies in an effort to reduce the amount of dining credits we purchase from individual restaurants and improve the risk profile of our dining credits portfolio. We have observed the amount of members spend at participating restaurants stabilize beginning in the second quarter of 2009. We will continue to monitor these trends and review our reserve rates.

In March 2007, we began to provide access to capital through a loan product, called RCR Loans. We discontinued offering the product line effective January 2008, although we continue to service RCR Loan notes that we previously purchased. The net RCR Loan balance was $40 as of September 30, 2009. We provide an allowance for our RCR Loan product using a specific reserve method based on the merchant's payment history and previous experience with the merchant, if applicable.

Deferred Tax Assets Valuation Allowance

We record a valuation allowance to reduce our deferred tax assets when it is not likely to be recognized due to cumulative losses and the uncertainty as to future recoverability. We consider future taxable income and available tax planning strategies in assessing the need for the valuation allowance. In the event we determine that we would not be able to realize all or part of our net deferred tax asset in the future, an adjustment to the deferred tax asset would be charged to income in the period in which such determination is made. As of September 30, 2009, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset.

Goodwill Impairment

On at least an annual basis, we evaluate whether events and changes in circumstances warrant the recognition of an impairment loss of unamortized goodwill. If it is determined that a triggering event has occurred, we evaluate goodwill for impairment between our annual testing dates. The conditions that could trigger an impairment assessment of unamortized goodwill include a significant, sustained negative trend in our operating results or cash flows, a decrease in demand for our programs, a change in the competitive environment, a decline in the market value of our Company and other industry and economic factors. Recoverability of an asset is measured by comparison of its carrying amount to the expected future cash flows. Any impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair market value. We utilize a discounted cash flow analysis in our impairment testing. Significant management judgment is required in the determination of an appropriate discount rate and the forecasting of future operating results that are used in the preparation of projected cash flows, and, if different conditions prevail or judgments are made, a material write-down of goodwill could occur.

We comply with Accounting Standards Codification ("ASC") 350-10, "Intangibles-Goodwill and Other," the current standard for periodic assessment of the carrying value of intangible assets, including goodwill. We assess the impact of ASC 350-10 using a two-step approach to assess goodwill based on applicable reporting units and any intangible assets, including goodwill, recorded in connection with our previous acquisitions. We report under a single reporting segment and our goodwill analysis is measured under one reporting unit. The first step of our analysis as of December 31, 2008 demonstrated that the fair value of the segment exceeded the carrying value of the segment. Based on this analysis, no impairment was recorded in 2008. An increase in our discount rate or changes to our cash flow and operating assumptions of our future performance could have resulted in a failure of our step one analysis causing a step two evaluation to be performed. The second step would involve calculating the fair value of assets and liabilities of the segment and comparing that amount to the carrying value of the goodwill to determine if any goodwill impairment is necessary. The carrying value of our goodwill as of September 30, 2009 and December 31, 2008 was $8,117.

Revenue Recognition

We recognize revenue from the Marketing Credits Program and Marketing Services Program when members patronize participating merchants and pay using a payment card they have registered with us. Revenue is recognized only if the member's transaction qualifies for a benefit in accordance with the rules of the member's particular program. The amount of revenue recognized is that portion of the member's total transaction amount that we are entitled to receive in cash, in accordance with the terms of our agreement with the participating merchant. We are entitled to receive a greater amount of cash from merchants in our Marketing Credits Program than from merchants in our Marketing Services Program. For example, if a member's total qualified transaction amount is $100 at a Marketing Credits Program merchant, as evidenced by the full amount of the payment card transaction, and our contract provides for us to receive 80%, the amount of revenue we recognize is $80, representing what we actually realize in cash. The same $100 transaction at a Marketing Services Program merchant may yield $17 in revenue to be recognized. Under the RCR Loan product, we recognize interest income on an effective yield basis over the life of the loan.

RESULTS OF OPERATIONS - COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2009
AND 2008

As a means of explaining our operations and results, the following table
illustrates the relationship between revenue and expense categories for the
three months ended September 30, 2009 and 2008. These percentages have been
rounded to the nearest tenth.



                                                     Percentage of Sales
                                                 for the Three Months Ended
                                                        September 30,
                                                    2009             2008
       Sales                                           100.0            100.0
       Cost of sales                                    48.4             53.2
       Provision for losses                              3.4              4.7
       Member benefits                                  15.5             12.7

       Net revenue                                      32.7             29.3

       Membership fees and other income                  0.5              0.5

       Total operating revenue                          33.2             29.8

       Salaries and benefits                             9.0              8.7
       Sales commission and expenses                     9.3              7.9
       Professional fees                                 1.0              1.3
       Member and merchant marketing expenses            1.2              1.6
       Depreciation and amortization                     2.3              2.0
       General and administrative expenses               4.6              5.0

       Total operating expenses                         27.6             26.5

       Operating income                                  5.6              3.3

       Other expense, net                                0.0              0.1


       Income before income tax provision                5.6              3.2

       Income tax provision                              2.0              0.8

       Net income                                        3.6              2.4

Operating Revenues

The following table sets forth for the periods presented sales, components of costs of sales and certain other information for each of our two marketing . . .