Edgar Filing: interCLICK, Inc.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	For the Three			For the Three			For the Six			For the Six
	Months Ended			Months Ended			Months Ended			Months Ended
	June 30, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Revenues	$	21,659,883		$	10,648,686		$	35,861,740		$	19,071,977
Cost of revenues		12,034,487			5,882,655			19,853,668			10,356,934
Gross profit		9,625,396			4,766,031			16,008,072			8,715,043

Operating expenses:
General and administrative		3,873,745			2,895,717			7,104,273			4,573,382
Sales and marketing		3,087,183			1,734,921			5,203,897			3,151,443
Technology support		1,419,362			797,552			2,758,940			1,381,883
Amortization of intangible assets		39,500			49,760			79,000			99,520
Total operating expenses		8,419,790			5,477,950			15,146,110			9,206,228

Operating income (loss) from continuing operations		1,205,606			(711,919	)		861,962			(491,185	)

Other income (expense):
Interest income		8,151			-			17,019			12
Warrant derivative liability income (expense)		(272	)		(159,294	)		21,413			(232,061	)
Loss on sale of available-for-sale securities		-			(36,349	)		-			(36,349	)
Other than temporary impairment of available-for-sale securities		-			-			(458,538	)		-
Interest expense		(74,537	)		(126,681	)		(176,946	)		(240,273	)
Total other expense		(66,658	)		(322,324	)		(597,052	)		(508,671	)

Income (loss) from continuing operations before income taxes		1,138,948			(1,034,243	)		264,910			(999,856	)

Income tax expense		(1,218,234	)		-			(139,126	)		-

Income (loss) from continuing operations		(79,286	)		(1,034,243	)		125,784			(999,856	)

Discontinued operations:
Loss on sale of discontinued operations, net of income taxes		-			-			-			(1,220	)
Loss from discontinued operations		-			-			-			(1,220	)

Net income (loss)		(79,286	)		(1,034,243	)		125,784			(1,001,076	)

Other comprehensive loss:
Unrealized loss on available-for-sale securities		(20,427	)		(899,999	)		(478,965	)		(899,999	)
Reclassification adjustments for losses included in net income (loss):
Loss on sale of available-for-sale securities		-			36,349			-			36,349
Other than temporary impairment of available-for-sale securities		-			-			458,538			-
Total other comprehensive loss		(20,427	)		(863,650	)		(20,427	)		(863,650	)

Comprehensive income (loss)	$	(99,713	)	$	(1,897,893	)	$	105,357		$	(1,864,726	)

Basic earnings (loss) per share:
Continuing operations	$	-		$	(0.05	)	$	0.01		$	(0.05	)
Discontinued operations		-			-			-			-
Net income	$	-		$	(0.05	)	$	0.01		$	(0.05	)

Diluted earnings (loss) per share:
Continuing operations	$	-		$	(0.05	)	$	0.01		$	(0.05	)
Discontinued operations		-			-			-			-
Net income	$	-		$	(0.05	)	$	0.01		$	(0.05	)

Weighted average number of common shares - basic		23,683,252			19,164,950			23,646,178			19,044,443
Weighted average number of common shares - diluted		23,683,252			19,164,950			24,820,111			19,044,443

F-3

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE SIX MONTHS ENDED JUNE 30, 2010

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

					Additional			Accumulated Other						Total
	Common Stock				Paid-In			Comprehensive			Accumulated			Stockholders'
	Shares		Amount		Capital			Loss			Deficit			Equity
Balance, January 1, 2010		23,632,707	$	23,633	$	42,229,293		$	-		$	(13,312,223	)	$	28,940,703
Stock-based compensation		-		-		1,822,070			-			-			1,822,070
Issuances of restricted shares		10,100		10		(10	)		-			-			-
Issuance of common shares for stock options and warrants exercised		155,778		156		228,576			-			-			228,732
Reclassification of warrant derivative liability to equity upon expiration of price protection		-		-		47,846			-			-			47,846
Unrealized loss on available-for-sale securities		-		-		-			(478,965	)		-			(478,965	)
Other than temporary impairment on available-for-sale securities		-		-		-			458,538			-			458,538
Net income		-		-		-			-			125,784			125,784
Balance, June 30, 2010		23,798,585	$	23,799	$	44,327,775		$	(20,427	)	$	(13,186,439	)	$	31,144,708

F-4

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	For the Six			For the Six
	Months Ended			Months Ended
	June 30, 2010			June 30, 2009
Cash flows from operating activities:
Net income (loss)	$	125,784		$	(1,001,076	)
Add back loss from discontinued operations, net		-			1,220
Income (loss) from continuing operations		125,784			(999,856	)
Adjustments to reconcile net income (loss) from continuing
operations to net cash provided by (used in) operating activities:
Stock-based compensation		1,822,070			1,353,743
Other than temporary impairment of available-for-sale securities		458,538			-
Depreciation of property and equipment		320,356			147,364
Amortization of intangible assets		79,000			99,520
Amortization of debt issue costs		4,972			21,583
Changes in deferred tax assets		(594,417	)		-
Provision for bad debts		(140,077	)		(160,392	)
Change in warrant derivative liability		(21,413	)		232,061
Loss on available-for-sale securities		-			36,349
Amortization of debt discount		-			500
Changes in operating assets and liabilities:
Increase in accounts receivable		(35,613	)		(2,968,432	)
Decrease (increase) in prepaid expenses and other current assets		45,402			(107,523	)
Increase in other assets		(15,394	)		-
(Decrease) increase in accounts payable		(442,026	)		1,083,434
(Decrease) increase in accrued expenses		(672,039	)		426,392
Increase in deferred rent		525,302			11,257
Decrease in income taxes payable		(515,306	)		-
Increase in accrued interest		-			1,346
Net cash provided by (used in) operating activities		945,139			(822,654	)

Cash flows from investing activities:
Proceeds from sale of available-for-sale securities		11,250			21,429
Increase in restricted cash		(1,292,960	)		-
Purchases of property and equipment		(573,929	)		(73,883	)
Net cash used in investing activities		(1,855,639	)		(52,454	)

Cash flows from financing activities:
Procees from common stock and warrants issued for cash		-			2,257,000
Proceeds from stock options and warrants exercised		228,732			-
(Repayments to) proceeds from credit facility, net		(1,981,113	)		1,574,859
Principal payments on notes payable		-			(100,000	)
Principal payments on capital leases		(68,307	)		(5,636	)
Net cash (used in) provided by financing activities		(1,820,688	)		3,726,223

Cash flows from discontinued operations:
Cash flows from investing activities-divestiture		-			(250,000	)
Net cash used in discontinued operations		-			(250,000	)

Net (decrease) increase in cash and cash equivalents		(2,731,188	)		2,601,115

Cash and cash equivalents at beginning of period		12,653,958			183,871

Cash and cash equivalents at end of period	$	9,922,770		$	2,784,986

F-5

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

	For the Six		For the Six
	Months Ended		Months Ended
	June 30, 2010		June 30, 2009
Supplemental disclosure of cash flow information:
Interest paid	$	203,191	$	192,267
Income taxes paid	$	1,219,583	$	-

Non-cash investing and financing activities:
Property and equipment acquired through capitalized leases	$	495,600	$	-
Leasehold improvements increased for deferred rent	$	83,070	$	-
Reclassification of warrant derivative liability to equity upon
expiration of price protection	$	47,846	$	-
Unrealized loss on available-for-sale securities	$	20,427	$	863,650
Issuance of common stock to eliminate or modify price protection for warrants	$	-	$	508,497
Issuance of common stock for services to be rendered	$	-	$	170,500
Issuance of common stock to pay accrued interest payable	$	-	$	13,266
Issuance of common stock to extend debt maturity date	$	-	$	12,000

F-6

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Operations

Overview

interCLICK, Inc. (the “Company”, or “interCLICK”) was formed in Delaware on March 4, 2002 under the name Outsiders Entertainment, Inc.

On August 28, 2007, the Company closed an Agreement and Plan of Merger and Reorganization (the “CAN Merger Agreement”) and acquired Customer Acquisition Network, Inc. (“CAN”), a privately-held corporation formed in Delaware on June 14, 2007. In connection with this acquisition, the Company changed its name to Customer Acquisition Network Holdings, Inc. On June 25, 2008, the Company changed its name to interCLICK, Inc.

On August 31, 2007, the Company closed an Agreement and Plan of Merger (the “Desktop Merger”), wherein the Company acquired Desktop Interactive, Inc. (“Desktop Interactive”), a privately-held Delaware corporation engaged in the Internet advertising business. Desktop Interactive merged with and into Desktop Acquisition Sub, Inc. (“Desktop”), a wholly-owned subsidiary of the Company. Desktop was the surviving corporation. Desktop was formed in Delaware on August 24, 2007.

interCLICK is an audience intelligence and targeting company, developing and executing data-driven campaign strategies for major digital agencies and marketers. Fueled by its proprietary software and sophisticated approach to managing its supply chain, the Company empowers its clients to reach desirable audiences efficiently, in brand-safe environments, and at tremendous scale. Virtually all of the Company’s revenues are generated in the United States.

On January 4, 2008, the Company closed an Agreement and Plan of Merger (the “Options Merger”), wherein the Company acquired Options Newsletter, Inc. (“Options Newsletter”). Options Newsletter merged with and into Options Acquisition Sub, Inc. (“Options Acquisition”), a wholly-owned subsidiary of the Company. Options Acquisition was the surviving corporation. On June 23, 2008, Options Acquisition was sold to Options Media Group Holdings, Inc (“OPMG”).

Basis of Presentation

The interim condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, all adjustments (consisting of normal recurring adjustments and reclassifications and non-recurring adjustments) necessary to present fairly our results of operations for the three and six months ended June 30, 2010 and 2009, our cash flows for the six months ended June 30, 2010 and 2009 and our financial position as of June 30, 2010, have been made. The results of operations for such interim periods are not necessarily indicative of the operating results to be expected for the full year.

Certain information and disclosures normally included in the notes to the annual consolidated financial statements have been condensed or omitted from these interim consolidated financial statements. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as filed with the SEC on March 31, 2010. The December 31, 2009 balance sheet is derived from those statements.

All references to outstanding shares, options, warrants and per share information have been adjusted to give effect to the one-for-two reverse stock split effective October 23, 2009.

The Company is particularly sensitive to seasonality given that the majority of its revenues are tied to CPM (cost-per-thousand) campaigns, which are strongest in the fourth quarter and weakest in the first quarter. While not necessarily indicative of future seasonality, the Company’s revenue mix in 2009 was as follows: 15.2% in the first quarter, 19.3% in the second quarter, 26.1% in the third quarter, and 39.4% in the fourth quarter.

F-7

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 2. Significant Accounting Policies

Use of Estimates

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of our unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our unaudited condensed consolidated financial statements would be affected to the extent there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. Significant estimates include the valuation of accounts receivable and allowance for doubtful accounts, estimates of depreciable lives and valuation of property and equipment, valuation and amortization periods of intangible assets and deferred costs, valuation of goodwill, valuation of discounts on debt, valuation of derivatives, valuation of investment in available-for-sale securities, valuation of shares of common stock, options and warrants granted for services or recorded as debt discounts or other non-cash purposes, the valuation allowance on deferred tax assets, and estimates of the tax effects of the sale of a subsidiary.

Principles of Consolidation

The consolidated financial statements include the accounts of interCLICK, Inc. and its wholly-owned subsidiary and Options Newsletter through its sale date. All significant inter-company balances and transactions have been eliminated in consolidation. As a result of the Options Divestiture, the results of Options Newsletter are reported as “Discontinued Operations”.

Restricted Cash

Restricted cash represents amounts pledged as security for certain agreements with vendors. Upon satisfying the payment terms of the agreements, the funds are expected to be released and available for use by the Company.

In January 2010, the Company pledged a $500,000, 3-month certificate of deposit, to a third party in connection with a service agreement. In April 2010 and July 2010, the certificate of deposit and the pledge were renewed for an additional three months.

In February 2010, the Company acquired $495,600 of computer equipment under a capitalized lease agreement. In connection with the lease agreement, the Company’s banking institution issued an irrevocable 1-year standby letter of credit for the benefit of the leasing company. The Company opened a 14-month certificate of deposit, bearing 0.56% interest, maturing April 1, 2011, with its banking institution in the amount of $495,600 and pledged that to the letter of credit. The Company shall consider the certificate of deposit and accrued interest as restricted cash until such letter of credit expires.

On March 11, 2010, the Company entered into a sub-lease agreement to relocate its New York City headquarters to a larger space, having 16,840 square feet. In connection with the lease agreement, the Company’s banking institution issued an irrevocable 1-year standby letter of credit for the benefit of the landlord. The Company opened a 14-month certificate of deposit, bearing 0.70% interest, maturing March 27, 2011, with its banking institution in the amount of $294,700 and pledged that to the letter of credit. Through the lease term, the Company is required to maintain a standby letter of credit for the benefit of the landlord. Accordingly, as of June 30, 2010, the Company has classified the certificate of deposit as restricted cash, a non-current asset.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the estimated useful lives of the assets per the following table. Leasehold improvements are amortized over the lesser of their useful life or the lease term. Expenditures for additions and improvements are capitalized while repairs and maintenance are expensed as incurred.

F-8

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company has adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”. ASC Topic 820 defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements. Excluded from the scope of ASC Topic 820 are certain leasing transactions accounted for under ASC Topic 840, “Leases.” The exclusion does not apply to fair value measurements of assets and liabilities recorded as a result of a lease transaction but measured pursuant to other pronouncements within the scope of ASC Topic 820.

Category		Depreciation Term
Computer equipment		3-5 years
Software		3 years
Furnitur eand fixtures		3-5 years
Office equipment		3-5 years
Leasehold improvements		5 years

Fair Value Measurements

Reclassifications

Certain amounts in the accompanying 2009 financial statements had been reclassified at December 31, 2009. In particular, bad debt expense is now included in general and administrative expenses. Merger, acquisition, and divestiture costs are now included in general and administrative expenses. Ad serving costs have been reclassified from general and administrative costs to cost of revenues. Whereas certain compensation costs (including stock-based compensation) had been included in sales and marketing expenses, a portion of these costs have been reclassified to either general and administrative expenses or technology support expenses. Deferred revenue is now included in accrued expenses. The following tables show the reclassifications to the condensed consolidated statements of operations for the three and six months ended June 30, 2009.

	For the Three Months Ended June 30, 2009
				Reclassifications
	As Previously Reported			Bad Debt Expense			Merger, Acquisition, and Divestiture Costs			Ad Serving Costs			Compensation and Employee- Related Costs			As Reclassified
Revenues	$	10,648,686														$	10,648,686
Cost of Revenue		5,624,005								$	258,650						5,882,655
Gross profit		5,024,681															4,766,031

Operating expenses:
General and administrative		2,414,255		$	47,375		$	113,156			(258,650	)	$	579,581			2,895,717
Sales and marketing		2,691,096												(956,175	)		1,734,921
Technology support		420,958												376,594			797,552
Merger, acquisition and divestiture costs		113,156						(113,156	)								-
Amortization of intangible assets		49,760															49,760
Baddebt expense		47,375			(47,375	)											-
Total operating expenses		5,736,600															5,477,950

Operating loss from continuing operations	$	(711,919	)													$	(711,919	)

F-9

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On June 23, 2008, the Company completed the sale of its Options Acquisition subsidiary pursuant to an Agreement of Merger and Plan of Reorganization. The amounts associated with the sale of this subsidiary are reported as discontinued operations in the accompanying consolidated financial statements, in accordance with ASC Topic 820. In addition, certain allocable corporate expenses pertaining to Options Acquisition are also included in discontinued operations.

	For the Six Months Ended June 30, 2009
				Reclassifications
	As Previously Reported			Bad Debt Expense			Merger, Acquisition, and Divestiture Costs			Ad Serving Costs			Compensation and Employee- Related Costs			As Reclassified
Revenues	$	19,071,977														$	19,071,977
Cost of Revenue		10,064,603								$	292,331						10,356,934
Gross profit		9,007,374															8,715,043

Operating expenses:
General and administrative		3,894,487		$	(160,392	)	$	178,535			(292,331	)	$	953,083			4,573,382
Sales and marketing		4,733,402												(1,581,959	)		3,151,443
Technology support		753,007												628,876			1,381,883
Merger, acquisition and divestiture costs		178,535						(178,535	)								-
Amortization of intangible assets		99,520															99,520
Baddebt expense		(160,392	)		160,392												-
Total operating expenses		9,498,559															9,206,228

Operating loss from continuing operations	$	(491,185	)													$	(491,185	)

Discontinued Operations

Accounting for Derivatives

The Company evaluates its options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC Topic 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815 are reclassified to liability at the fair value of the instrument on the reclassification date.

Codification Update

In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”. This update provides amendments to Topic 820 to provide more robust disclosures about (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The adoption of ASU 2010-06 did not have a material impact on the Company’s consolidated results of operations or financial condition.

In February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855): Amendments to Certain Recognition and Disclosure Requirements”. This update addresses both the interaction of the requirements of Topic 855, “Subsequent Events”, with the SEC’s reporting requirements and the intended breadth of the reissuance disclosures provision related to subsequent events (paragraph 855-10-50-4). The amendments in this update have the potential to change reporting by both private and public entities, however, the nature of the change may vary depending on facts and circumstances. The adoption of ASU 2010-09 did not have a material impact on the Company’s consolidated results of operations or financial condition.

F-10

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

In April 2010, the FASB issued ASU No. 2010-13, “Compensation – Stock Compensation”. This update clarified the classification of an employee share based payment award with an exercise price denominated in the currency of a market in which the underlying security trades. This update will be effective for the first fiscal quarter beginning after December 15, 2010, with early adoption permitted. The Company does not expect the provisions of ASU 2010-13 to have a material effect on the Company’s consolidated results of operations or financial condition.

Note 3. Property and Equipment

Property and equipment consisted of the following at June 30, 2010 and December 31, 2009:

	June 30, 2010			December 31, 2009
Computerequipment	$	2,202,725		$	1,433,461
Furnitureandfixtures		195,596			72,711
Software		144,258			57,572
Leaseholdimprovements		173,764			-
Officeequipment		22,443			22,443
		2,738,786			1,586,187
Accumulateddepreciation		(917,644	)		(597,288	)
Propertyandequipment, net	$	1,821,142		$	988,899

In February 2010, the Company acquired $495,600 of computer equipment under a capitalized lease agreement. Property and equipment held under capitalized leases of $1,015,965 and $520,365 at June 30, 2010 and December 31, 2009, respectively, are included in computer equipment above.

Depreciation expense for the six months ended June 30, 2010 and 2009 was $320,356 and $147,364, of which $78,976 and $2,936, respectively, pertained to capitalized leases. Accumulated depreciation amounted to $917,644 and $597,288, of which $96,128 and $17,152 pertained to capitalized leases, as of June 30, 2010 and December 31, 2009, respectively.

Note 4. Intangible Assets

Intangible assets, which were all acquired from the Desktop business combination, consisted of the following at June 30, 2010 and December 31, 2009:

	June 30, 2010			December 31, 2009
Customer relationships	$	540,000		$	540,000
Developed technology		790,000			790,000
Domain name		683			683
		1,330,683			1,330,683
Accumulated amortization		(988,350	)		(909,350	)
Intangible assets, net	$	342,333		$	421,333

Customer relationships are fully amortized and were amortized based upon the estimated percentage of annual or period projected cash flows generated by such relationships, to the total cash flows generated over the estimated three-year life of the customer relationships. Accordingly, this resulted in accelerated amortization in which the majority of costs were amortized during the two-year period following the acquisition date of the intangible.

Developed technology is being amortized on a straight-line basis over five years.

The domain name is fully amortized and was amortized over its remaining life of six months following the acquisition date of the intangible.

F-11

INTERCLICK, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(Unaudited)

The following is a schedule of estimated future amortization expense of intangible assets as of June 30, 2010:

Year Ending December 31,
2010	$	79,000
2011		158,000
2012		105,333
Total	$	342,333

Note 5. Investment in Available-For-Sale Marketable Securities

The following represents information about available-for sale securities held at June 30, 2010:

Securities in loss positions	Amortized		Aggregate		Aggregate
more than 12 months	Cost Basis		Unrealized losses		Fair Value
Options Media Group Holdings, Inc. ("OPMG")	$	245,821	$	20,427	$	225,394

The following represents information about available-for sale securities held at December 31, 2009:

Securities in loss positions	Amortized		Aggregate		Aggregate
more than 12 months	Cost Basis		Unrealized losses		Fair Value
Options Media Group Holdings, Inc. ("OPMG")	$	715,608	$	-	$	715,608

In May 2009, the Company sold 214,285 OPMG shares having a basis of $57,778 for proceeds of $21,429 resulting in a loss of $36,349.

As of December 31, 2009, the Company concluded that OPMG’s quoted market price was not a reliable basis to use for fair valuation because OPMG was too thinly traded and its stock price too volatile, and therefore did not reliably occur in an active market. Furthermore, attempting to sell a significant number of OPMG shares on the open market would not have been worthwhile because it would require interCLICK to trade many small blocks and pay broker commissions for each transaction. The Company therefore believed that a private transaction was among the most economically feasible ways to sell any portion of interCLICK’s investment in OPMG. Accordingly, the Company applied Level 2 considerations to determine the market value using the best available evidence. The Company concluded that recent principal-to-principal (non-distressed) transactions – in November 2009 and January 2010 at $0.10 per share – were appropriate valuation inputs to determine fair value of OPMG shares as of December 31, 2009.

In January 2010, the Company sold 112,500 OPMG shares having a basis of $11,250 for proceeds of $11,250 resulting in no gain or loss.

As of March 31, 2010, the Company determined that its investment in OPMG shares was other than temporarily impaired to $0.0349 per share (from a basis of $0.10 per share) and recognized an other than temporary impairment of $458,538. This was based primarily on the extent and length of time over which the investment had been in a continuous loss position and the Company’s belief that it is unlikely OPMG’s stock price will increase significantly in the foreseeable future. Furthermore, the Company has not conducted any private sale transactions and has not received any offers to buy shares at any price. The Company may also attempt to sell some shares in the open market in the near future.

During the first six months of 2010 and to date, OPMG has traded in an active market. Sufficient trading volume, the lack of principal-to-principal transactions to support a value higher than current market price, and the near-term potential of the Company selling OPMG shares in the open market support the use of a Level 1 input (market price) for the basis of fair value as of June 30, 2010. On such date, OPMG’s closing market price was $0.032 per share.

F-12

INTERCLICK, INC. AND SUBSIDIARY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2010

(Unaudited)

As of June 30, 2010, the Company determined that its investment in OPMG was temporarily impaired due to the relatively short amount of time OPMG has traded under $.0349. Thus, the Company valued its investment at $225,394 as of June 30, 2010, and an unrealized loss of $20,427 has been recognized in other comprehensive loss for the three and six months ended June 30, 2010.

Note 6. Credit Facility Agreement and Capital Lease Obligations

Credit Facility Agreement

On November 13, 2008, the Company entered into a revolving credit facility, in the form of an Accounts Receivable Financing Agreement (the “Agreement”), with Crestmark Commercial Capital Lending, LLC (“Crestmark”) to finance certain eligible accounts receivable of the Company, as defined in the Agreement, up to a maximum credit line of $3.5 million (subsequently increased to $4.5 million on February 3, 2009, $5.5 million on April 30, 2009, and to $7.0 million on September 2, 2009), which would represent gross financed accounts receivable less a 20% reserve holdback by Crestmark. The Crestmark credit facility has an interest rate equal to prime plus 1.0% (overall interest rate of 4.25% at June 30, 2010) and is secured by all of the Company’s assets except property and equipment financed elsewhere and the Company’s investment in OPMG shares. In addition, the Company pays a monthly fee (initially 0.575% and decreased to 0.375% on September 2, 2009) per 30 days on each financed invoice amount until the invoice is paid. The Crestmark credit facility was for an initial term of six months expiring May 12, 2009 (extended on March 3, 2009 for one year to May 12, 2010) and effective May 12, 2010, either the Company or Crestmark may terminate the Agreement with 60 days prior written notice to the other party without being subject to any early termination fee. On July 12, 2010, the Company provided Crestmark with notification of termination of the Agreement effective September 10, 2010. The Company is in advanced discussions with another lender about establishing a replacement line of credit which would likely be secured by most of the Company’s assets.

The balance due on the credit facility at June 30, 2010 was $2,227,554, which is net of the 20% reserve of $556,889 that is presented as Credit facility reserve, a current asset. The unused amount under the credit facility available to the Company at June 30, 2010 was $4,772,446. The average monthly net balance due under the credit facility was $1,813,231 and $3,502,410 for the six months ended June 30, 2010 and 2009, respectively.

The following is a summary of accounts receivable financed as well as credit facility fees incurred for the three and six months ended June 30, 2010 and 2009:

	For the Three		For the Three		For the Six		For the Six
	Months Ended		Months Ended		Months Ended		Months Ended
	June 30, 2010		June 30, 2009		June 30, 2010		June 30, 2009
Accounts receivable financed	$	3,403,055	$	9,134,370	$	6,430,031	$	15,708,010

Credit facility fees incurred	$	56,639	$	150,625	$	151,134	$	247,487

Capital Lease Obligations

In February 2010, the Company purchased computer equipment for $495,600 through a capital lease agreement, bearing interest of 8.35%, payable in 12 quarterly installments of $47,119.

Capital lease obligations consisted of the following at June 30, 2010 and December 31, 2009:

	June 30, 2010			December 31, 2009
Capital lease obligations	$	927,795		$	500,502
Less: Current maturities		(331,909	)		(161,940	)
Amount due after one year	$	595,886		$	338,562

F-13

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 7. Fair Value of Financial Instruments

The estimated fair value of certain financial instruments, including cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.

The accounting standard for fair value measurements provides a framework for measuring fair value and requires expanded disclosures regarding fair value measurements. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants on the measurement date. The accounting standard established a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

We classify assets and liabilities measured at fair value in their entirety based on the lowest level of input that is significant to their fair value measurement. Assets and liabilities measured at fair value on a recurring basis consisted of the following at June 30, 2010:

	Total Carrying		Fair Value Measurements at						Total Carrying		Fair Value Measurements at
	Value at		June 30, 2010						Value at		December 31, 2009
	June 30, 2010		(Level 1)		(Level 2)		(Level 3)		December 31, 2009		(Level 1)		(Level 2)		(Level 3)
Assets:
Investment in available-for-sale
marketable securities	$	225,394	$	225,394	$	-	$	-	$	715,608	$	-	$	715,608	$	-

Liabilities:
Warrant derivative liability	$	-	$	-	$	-	$	-	$	69,258	$	-	$	69,258	$	-

Unrealized gains (losses) recognized on the investment in available-for-sale marketable securities are included in other comprehensive income (loss) in the accompanying condensed consolidated statements of operations (See Note 5 for valuation methodology). Realized gains (losses) recognized on the investment in available-for-sale marketable securities are included in other income (expense) in the accompanying condensed consolidated statements of operations. Income (expense) recognized on the warrant derivative liability are included in other income (expense) in the accompanying condensed consolidated statements of operations.

The valuation technique of the investment in available-for-sale marketable securities changed during the three months ended March 31, 2010. At March 31, 2010, the Company began utilizing the closing share price of OPMG’s stock (Level 1) in order to value the Company’s remaining investment in OPMG shares. Previously, the Company had been utilizing recent sales prices in private transactions (Level 2) to value its investment in OPMG shares as management believed OPMG’s quoted market price was not a reliable basis to use for fair valuation based on the conclusion that OPMG was too thinly traded and therefore did not reliably occur in an active market.

Note 8. Commitments and Contingencies

Operating Leases

In January 2010, the Company entered into a 16-month agreement for its Chicago office space with monthly rent of $2,151 commencing February 1, 2010 with 3.0% escalation effective June 1, 2010.

In February 2010, the lease amendment for the Company’s office space located in Boca Raton, Florida became effective upon completion of the improvements to the expansion premises. Accordingly, the Company moved into the expansion premises and agreed to (i) lease additional space for a period of 60 months, and (ii) extend the lease term of the original space to terminate the same time as the expanded space. Upon the expansion premises commencement date, the original premises monthly rent was adjusted to $2,840 with 3.0% annual escalation and the expansion premises monthly rent was $6,923 with 3.0% annual escalation. The landlord provided an allowance of $83,070 for the improvements to the expansion premises as well as an abatement of rent for the first 14 months of the lease on the expansion premises. The leasehold improvements were recognized with an $83,070 increase in property and equipment and a corresponding increase in deferred rent, both of which shall be amortized over the lease term.

F-14

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On February 22, 2010, the Company entered into a 5-year agreement, commencing June 1, 2010, for office space in Santa Monica, California bearing monthly rent of $3,827 with an annual 3.0% escalation.

On March 11, 2010, the Company entered into a sub-lease agreement to relocate its New York City headquarters to a larger space, having 16,840 square feet. The new lease is for a term of 92 months commencing on May 1, 2010, bearing monthly rent of $49,117 with an annual 2.5% escalation. In connection with the lease agreement, the Company’s banking institution issued an irrevocable 1-year standby letter of credit for the benefit of the landlord. The Company opened a certificate of deposit with its banking institution in the amount of $294,700 and pledged that to the letter of credit. Through the lease term, the Company is required to maintain a standby letter of credit for the benefit of the landlord. Accordingly, as of June 30, 2010, the Company has classified the certificate of deposit as restricted cash, a non-current asset.

The Company entered into an agreement to sublease the office space of its former New York City headquarters commencing May 1, 2010 for the remainder of the original lease term with monthly rent of $16,717 with an annual 2.5% escalation. Accordingly, the Company recognized an early cease use liability of $497,851 pertaining to the prior New York office space. The charge to operations for the establishment of the liability was offset by $66,350 due to the elimination of deferred rent related to the former office space. The balance of the early cease use liability was $454,140 at June 30, 2010, of which $345,802 is long-term.

Minimum Fees

The Company is party to multi-year agreements with third parties whereby the Company is obligated to incur minimum fees of $2,154,250 in 2010 and $1,568,000 in 2011. Under the agreements, the Company has expensed $873,947 in fees during the six months ended June 30, 2010.

Legal Matters

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of June 30, 2010, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations.

There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

Note 9. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue up to 10,000,000 shares of preferred stock having a par value of $0.001 per share, of which none was issued and outstanding at June 30, 2010 and December 31, 2009.

Common Stock

The Company is authorized to issue up to 140,000,000 shares of common stock having a par value of $0.001 per share, of which 23,798,585 and 23,632,707 shares were issued and outstanding at June 30, 2010 and December 31, 2009, respectively.

During the six months ended June 30, 2010, proceeds of $228,732 were received and an aggregate of 155,778 shares were issued as a result of stock option and warrant exercises.

F-15

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

A summary of the Company’s warrant activity during the six months ended June 30, 2010 is presented below:

Stock Warrants

Warrants	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2009		1,286,809		$	3.51
Granted		25,000		$	4.44
Exercised		(213,750	)	$	2.80
Forfeited		(60,000	)	$	4.24
Expired		(5,000	)	$	11.14
Balance Outstanding, June 30, 2010		1,033,059		$	3.60		2.4	$	459,224

Exercisable, June 30, 2010		1,014,309		$	3.58		2.4	$	459,224

During 2010, 15,494 of the Company’s warrants contained round-down protection (price protection), which caused the warrants to be treated as derivatives (see Note 7). In May 2010, price protection expired requiring $47,846 of the warrant derivative liability to be reclassified to additional paid-in capital. Accordingly, the fair value of the warrant derivative liability was $0 as of June 30, 2010 as shown in the accompanying condensed consolidated balance sheet. The change in fair value (taking into consideration the cumulative effect of the change in accounting principle adopted on January 1, 2009) of the warrant derivative liability of $21,413 and ($232,061) during the six months ended June 30, 2010 and 2009, respectively, has been recorded in the accompanying condensed consolidated statements of operations as warrant derivative liability income (expense).

Stock Incentive Plan and Stock Option Grants to Employees and Directors

In 2007, the Company adopted the 2007 Stock Incentive Plan (the “Plan”) and the 2007 Incentive Stock and Award Plan (the “2007 Award Plan”) that provide for the grant of shares of common stock and/or options to purchase shares of common stock to directors, employees and consultants. On June 11, 2010, the Company increased the number of shares of common stock eligible for grant under the 2007 Award Plan from 3,112,500 to 4,512,500 shares.

During the six months ended June 30, 2010, the Company granted 529,000 stock options, all of which were under the 2007 Award Plan, at various exercise prices ranging from $3.68 to $5.46 per share. The options vest pro rata over three to four years; all options expire five years from the grant date.

The total fair value of stock options granted to employees during the six months ended June 30, 2010 was $1,634,023, which is being recognized over the respective vesting periods. During the six months ended June 30, 2010 and 2009, the Company recorded compensation expense of $1,659,872 and $1,334,630, respectively, in connection with employee stock options.

As of June 30, 2010, 1,437,983 shares were remaining under the 2007 Award Plan for future issuance.

The Company estimates the fair value of share-based compensation utilizing the Black-Scholes option pricing model, which is dependent upon several variables such as the expected option term, expected volatility of our stock price over the expected term, expected risk-free interest rate over the expected option term, expected dividend yield rate over the expected option term, and an estimate of expected forfeiture rates. The Company believes this valuation methodology is appropriate for estimating the fair value of stock options granted to employees and directors which are subject to ASC Topic 718 requirements. These amounts are estimates and thus may not be reflective of actual future results, nor amounts ultimately realized by recipients of these grants. The Company recognizes compensation on a straight-line basis over the requisite service period for each award. The following table summarizes the assumptions the Company utilized to record compensation expense for stock options granted during the six months ended June 30, 2010 and 2009:

	For the Six			For the Six
	Months Ended			Months Ended
Assumptions	June 30, 2010			June 30, 2009
Expected life (years)		3.5 - 3.75			5.0
Expected volatility		102.6% - 110.1	%		117.2% - 121.4	%
Weighted-average volatility		107.4	%		120.5	%
Risk-free interest rate		2.02% - 2.69	%		1.89% - 2.86	%
Dividend yield		0.00	%		0.00	%
Expected forfeiture rate		8.7	%		2.8	%

F-16

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

For stock options issued through September 30, 2009, the expected life is based on the contractual term. Thereafter, the Company utilized the simplified method to estimate the expected life for stock options granted to employees. The simplified method was used as the Company does not have sufficient historical data regarding stock option exercises. The expected volatility is based on historical volatility. The risk-free interest rate is based on the U.S. Treasury yields with terms equivalent to the expected life of the related option at the time of the grant. Dividend yield is based on historical trends. While the Company believes these estimates are reasonable, the compensation expense recorded would increase if the expected life was increased, a higher expected volatility was used, or if the expected dividend yield increased.

A summary of the Company’s stock option activity for employees and directors during the six months ended June 30, 2010 is presented below:

Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2009		4,994,167		$	2.69
Granted		529,000		$	4.42
Exercised		(43,333	)	$	2.05
Forfeited		(234,375	)	$	3.24
Expired		-		$	-
Balance Outstanding, June 30, 2010		5,245,459		$	2.85		3.5	$	5,411,505

Expected to vest, June 30, 2010		5,081,854		$	2.82		3.4	$	5,333,440

Exercisable, June 30, 2010		2,202,220		$	2.18		2.8	$	3,306,200

The weighted-average grant-date fair value of options granted to employees during the six months ended June 30, 2010 and 2009 was $3.09 and $1.98, respectively. The total intrinsic value of options exercised by employees during the six months ended June 30, 2010 and 2009 was $136,749 and $0, respectively.

Nonvested Common Stock Grants to Employees

On January 25, 2010, the Company granted an aggregate of 7,600 restricted shares of common stock having a fair value of $39,596 (based on a quoted trading price of $5.21 per share) to employees. The shares were issued under the 2007 Award Plan and vest annually over a two-year period, subject to continued employment by the Company.

F-17

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

During the six months ended June 30, 2010 and 2009, the Company recognized an aggregate amount of $58,327 and $4,931 of stock-based compensation for nonvested shares of common stock issued to employees.

Nonvested Shares	Number of Shares			Weighted Average Grant Date Fair Value
Nonvested at December 31, 2009		73,594		$	4.21
Granted		7,600		$	5.21
Vested		(13,516	)	$	3.29
Forfeited		-		$	-
Nonvested at June 30, 2010		67,678		$	4.51

The total fair value of shares vested to employees during the six months ended June 30, 2010 was $56,420.

As of June 30, 2010, there was $7,056,996 of total unrecognized compensation costs related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.3 years.

Other Stock-Based Awards to Nonemployees

On April 15, 2010, as part of a one-year consulting agreement, the Company granted warrants to purchase an aggregate of 25,000 shares of common stock having a fair value of $72,000 to a consultant for services to be rendered. The warrants have an exercise price of $4.44 per share, were not part of the 2007 Award Plan, vest in equal increments quarterly over a one-year period commencing June 30, 2010, and expire three years from the grant date. As these warrants were issued to nonemployees, the fair value was recalculated at June 30, 2010 at $52,750 and, accordingly, $22,945 was recognized as stock-based compensation during the three months ended June 30, 2010. The warrants shall be revalued and expensed in a similar manner in each subsequent reporting period during the consultant’s one-year service term.

During the six months ended June 30, 2010 and 2009, the Company recognized an aggregate amount of $103,871 and $14,182 of stock-based compensation for stock options, stock warrants and common shares issued to nonemployees.

Note 10. Net Earnings (Loss) per Share

Basic earnings (loss) per share are computed using the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share are computed using the weighted average number of common shares and potentially dilutive securities outstanding during the period. Potentially dilutive securities consist of the incremental shares of common stock issuable upon exercise of stock options and warrants (using the treasury stock method) as well as nonvested shares of common stock and convertible debt. The options, warrants and nonvested shares are considered to be common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive.

F-18

Components of basic and diluted earnings per share for the six months ended June 30, 2010 was as follows:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Options to purchase 5,395,459 and 1,781,500 shares of common stock and warrants to purchase 1,033,059 and 198,750 shares of common stock were outstanding during the three and six months ended June 30, 2010, respectively, but were not included in the computation of diluted earnings per share because the effects would have been anti-dilutive. In addition, 67,678 nonvested shares were not included in the computation of diluted earnings per share for the three months ended June 30, 2010, because the number of shares assumed purchased (calculated using the compensation cost attributed to future services and not yet recognized) under the treasury stock method exceeds the number of shares that would be issued.

	For the Six Months Ended June 30, 2010
	Income		Shares		Per-Share
	(Numerator)		(Denominator)		Amount
Net income	$	125,784

Basic EPS
Income available to common stockholders	$	125,784		23,646,178	$	0.01

Effect of Dilutive Securities
Stock options		-		919,708
Stock warrants		-		241,817
Nonvested shares		-		12,408

Diluted EPS
Income available to common stockholders
+ assumed conversions	$	125,784		24,820,111	$	0.01

Options to purchase 4,053,750 common shares, warrants to purchase 1,126,025 common shares, 24,610 nonvested common shares and $100,000 of convertible debt were outstanding during the three and six months ended June 30, 2009, but were not included in the computation of diluted loss per share because the effects would have been anti-dilutive. The options and warrants are considered to be common stock equivalents and are only included in the calculation of diluted earnings per common share when their effect is dilutive.

Note 11. Income Taxes

The Company files a consolidated U.S. income tax return that includes its U.S. subsidiary. The Company also files state income tax returns in California, Florida, Illinois, New York and Texas. The Company has recorded an income tax provision for the six months ended June 30, 2010 of $139,126. The tax provision is based on the Company's estimate of the effective tax rate expected to be applicable for the full year. The effective tax rate of 52.5% for the six months ended June 30, 2010 differs from the statutory rate principally because of state income taxes, a valuation allowance established on capital loss carryforwards and other non deductible expenses. The effective rate is based on the Company's best estimate of projected income through the end of the year, in which the first quarter is typically seasonally weakest and the fourth quarter is expected to be seasonally strongest (see Note 1).

Note 12. Concentrations

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist of cash and cash equivalents and accounts receivable. Cash and cash equivalents are deposited in the local currency in various financial institutions in the United States. The balance, at any given time, may exceed Federal Deposit Insurance Corporation insurance limits. As of June 30, 2010 and December 31, 2009, there was approximately $11,175,000 and $13,336,000, respectively, in excess of insurable limits.

F-19

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS