Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the quarterly period ended June 30, 2009
|
|
|
|
OR
|
|
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the transition period from ________________ to
________________
|
Commission
file number: 333-141141
interCLICK,
Inc.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
01-0692341
|
(State
or other jurisdiction of
|
|
(I.R.S.
Employer
|
incorporation
or organization)
|
|
Identification
No.)
|
|
|
|
257
Park Avenue South, Ste. 602, New York, NY
|
|
10010
|
(Address
of principal executive offices)
|
|
(Zip
Code)
|
(646)
722-6260
(Registrant’s
telephone number, including area code)
N/A
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes x
No
o
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).
Yes o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
|
|
Non-accelerated
filer o (Do
not check if a smaller reporting company)
|
Smaller
reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).
Yes o
No
x
Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Class
|
|
Outstanding
at August 11, 2009
|
Common
Stock, $0.001 par value per share
|
|
41,277,472
shares
|
TABLE
OF CONTENTS
|
Page
|
PART
I – FINANCIAL INFORMATION
|
|
|
|
Item
1.
|
Condensed
Consolidated Financial Statements (unaudited)
|
F-1
|
|
|
|
Condensed
Consolidated Balance Sheets (unaudited)
|
F-2
|
|
|
Condensed
Consolidated Statements of Operations (unaudited)
|
F-3
|
|
|
Condensed
Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
|
F-4
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited)
|
F-5
|
|
|
Notes
to unaudited Condensed Consolidated Financial
Statements
|
F-7
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operation
|
3
|
|
|
|
Item
3.
|
Qualitative
and Quantitative Disclosures about Market Risk
|
10
|
|
|
|
Item
4.
|
Controls
and Procedures
|
10
|
|
|
|
Item
4T.
|
Controls
and Procedures
|
10
|
|
|
|
PART
II – OTHER INFORMATION
|
|
|
|
Item
1.
|
Legal
Proceedings
|
11
|
|
|
|
Item
1A.
|
Risk
Factors
|
11
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
11
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
11
|
|
|
|
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
11
|
|
|
|
Item
5.
|
Other
Information
|
12
|
|
|
|
Item
6.
|
Exhibits
|
12
|
|
|
|
SIGNATURES
|
13
|
PART
I – FINANCIAL INFORMATION
Item
1.
|
Financial
Statements.
|
interCLICK,
Inc. (Formerly Customer Acquisition Network Holdings, Inc.) Index to
Condensed Consolidated Financial
Statements
|
|
|
Page
|
Financial
Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets – June 30, 2009 (unaudited) and
December 31, 2008
|
|
F-2
|
Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 2009 and 2008 (unaudited)
|
|
F-3
|
Condensed
Consolidated Statement of Changes in Stockholders' Equity for the six
months ended June 30, 2009 (unaudited)
|
|
F-4
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2009 and 2008 (unaudited)
|
|
F-5
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
|
F-7
|
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June 30, 2009
|
|
|
December 31, 2008
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
2,784,986 |
|
|
$ |
183,871 |
|
Accounts
receivable, net of allowance of $185,032 and $425,000,
respectively
|
|
|
10,249,135 |
|
|
|
7,120,311 |
|
Due
from factor
|
|
|
1,034,712 |
|
|
|
637,705 |
|
Prepaid
expenses and other current assets
|
|
|
372,187 |
|
|
|
94,164 |
|
Total
current assets
|
|
|
14,441,020 |
|
|
|
8,036,051 |
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
523,432 |
|
|
|
596,913 |
|
Intangible
assets, net
|
|
|
510,593 |
|
|
|
610,113 |
|
Goodwill
|
|
|
7,909,571 |
|
|
|
7,909,571 |
|
Investment
in available-for-sale marketable securities
|
|
|
728,572 |
|
|
|
1,650,000 |
|
Deferred
debt issue costs, net of accumulated amortization of $28,250 and $6,667,
respectively
|
|
|
11,750 |
|
|
|
33,333 |
|
Other
assets
|
|
|
191,664 |
|
|
|
191,664 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
24,316,602 |
|
|
$ |
19,027,645 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Liability
on transferred accounts receivable
|
|
$ |
5,160,291 |
|
|
$ |
3,188,425 |
|
Senior
secured note payable - related party, net of debt discount of $11,500 and
$0, respectively
|
|
|
188,500 |
|
|
|
400,000 |
|
Convertible
note payable - related party
|
|
|
100,000 |
|
|
|
- |
|
Payable
and promissory note settlement liability
|
|
|
- |
|
|
|
248,780 |
|
Accounts
payable
|
|
|
6,372,241 |
|
|
|
5,288,807 |
|
Accrued
expenses
|
|
|
603,501 |
|
|
|
310,685 |
|
Accrued
interest
|
|
|
5,028 |
|
|
|
16,948 |
|
Obligations
under capital leases, current portion
|
|
|
10,098 |
|
|
|
10,615 |
|
Deferred
rent, current portion
|
|
|
2,906 |
|
|
|
- |
|
Deferred
revenue
|
|
|
143,548 |
|
|
|
9,972 |
|
Warrant
derivative liability
|
|
|
143,578 |
|
|
|
- |
|
Total
current liabilities
|
|
|
12,729,691 |
|
|
|
9,474,232 |
|
|
|
|
|
|
|
|
|
|
Obligations
under capital leases, net of current portion
|
|
|
4,376 |
|
|
|
9,495 |
|
Deferred
rent
|
|
|
81,047 |
|
|
|
72,696 |
|
Total
liabilities
|
|
|
12,815,114 |
|
|
|
9,556,423 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies (Note 7)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Preferred
stock, $0.001 par value; 10,000,000 shares authorized, zero shares issued
and outstanding
|
|
|
- |
|
|
|
- |
|
Common
stock, $0.001 par value; 140,000,000 shares authorized, 41,228,253 and
37,845,167 issued and outstanding, respectively
|
|
|
41,228 |
|
|
|
37,846 |
|
Additional
paid-in capital
|
|
|
27,336,744 |
|
|
|
24,889,586 |
|
Accumulated
other comprehensive loss
|
|
|
(1,061,354 |
) |
|
|
(197,704 |
) |
Accumulated
deficit
|
|
|
(14,815,130 |
) |
|
|
(15,258,506 |
) |
Total
stockholders’ equity
|
|
|
11,501,488 |
|
|
|
9,471,222 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
24,316,602 |
|
|
$ |
19,027,645 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
|
For
the Three
|
|
|
For
the Three
|
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
10,648,686 |
|
|
$ |
4,673,629 |
|
|
$ |
19,071,977 |
|
|
$ |
8,235,596 |
|
Cost
of revenues
|
|
|
5,624,005 |
|
|
|
3,412,541 |
|
|
|
10,064,603 |
|
|
|
6,120,079 |
|
Gross
profit
|
|
|
5,024,681 |
|
|
|
1,261,088 |
|
|
|
9,007,374 |
|
|
|
2,115,517 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative (includes stock-based compensation of $777,173,
$502,379, $1,353,743 and $976,553, respectively)
|
|
|
2,414,255 |
|
|
|
1,410,607 |
|
|
|
3,894,487 |
|
|
|
3,139,705 |
|
Sales
and marketing
|
|
|
2,691,096 |
|
|
|
1,445,894 |
|
|
|
4,733,402 |
|
|
|
2,270,642 |
|
Technology
support
|
|
|
420,958 |
|
|
|
231,371 |
|
|
|
753,007 |
|
|
|
508,409 |
|
Merger,
acquisition, divestiture and investor relations costs
|
|
|
113,156 |
|
|
|
274,903 |
|
|
|
178,535 |
|
|
|
512,062 |
|
Amortization
of intangible assets
|
|
|
49,760 |
|
|
|
104,630 |
|
|
|
99,520 |
|
|
|
209,367 |
|
Bad
debt expense
|
|
|
47,375 |
|
|
|
97,436 |
|
|
|
(160,392 |
) |
|
|
102,236 |
|
Total
operating expenses
|
|
|
5,736,600 |
|
|
|
3,564,841 |
|
|
|
9,498,559 |
|
|
|
6,742,421 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss from continuing operations
|
|
|
(711,919 |
) |
|
|
(2,303,753 |
) |
|
|
(491,185 |
) |
|
|
(4,626,904 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
- |
|
|
|
3,329 |
|
|
|
12 |
|
|
|
6,763 |
|
Interest
expense
|
|
|
(126,681 |
) |
|
|
(534,887 |
) |
|
|
(240,273 |
) |
|
|
(1,233,503 |
) |
Loss
on settlement of debt
|
|
|
- |
|
|
|
(20,121 |
) |
|
|
- |
|
|
|
(20,121 |
) |
Change
in fair value of warrant derivative liability
|
|
|
(159,294 |
) |
|
|
- |
|
|
|
(232,061 |
) |
|
|
- |
|
Loss
on sale of available for sale securities
|
|
|
(36,349 |
) |
|
|
- |
|
|
|
(36,349 |
) |
|
|
- |
|
Total
other income (expense)
|
|
|
(322,324 |
) |
|
|
(551,679 |
) |
|
|
(508,671 |
) |
|
|
(1,246,861 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before equity investment
|
|
|
(1,034,243 |
) |
|
|
(2,855,432 |
) |
|
|
(999,856 |
) |
|
|
(5,873,765 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
in investee's loss, net of income taxes
|
|
|
- |
|
|
|
(249,128 |
) |
|
|
- |
|
|
|
(249,128 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
(1,034,243 |
) |
|
|
(3,104,560 |
) |
|
|
(999,856 |
) |
|
|
(6,122,893 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations, net of income taxes
|
|
|
- |
|
|
|
(218,187 |
) |
|
|
- |
|
|
|
(935,173 |
) |
Loss
on sale of discontinued operations, net of income taxes
|
|
|
- |
|
|
|
(624,981 |
) |
|
|
(1,220 |
) |
|
|
(624,981 |
) |
Loss
from discontinued operations, net
|
|
|
- |
|
|
|
(843,168 |
) |
|
|
(1,220 |
) |
|
|
(1,560,154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,034,243 |
) |
|
$ |
(3,947,728 |
) |
|
$ |
(1,001,076 |
) |
|
$ |
(7,683,047 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
per share from continuing operations - basic and diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.17 |
) |
Loss
per share from discontinued operations - basic and diluted
|
|
$ |
- |
|
|
$ |
(0.02 |
) |
|
$ |
- |
|
|
$ |
(0.04 |
) |
Net
loss per share - basic and diluted
|
|
$ |
(0.03 |
) |
|
$ |
(0.11 |
) |
|
$ |
(0.03 |
) |
|
$ |
(0.21 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares - basic and diluted
|
|
|
38,329,875 |
|
|
|
36,940,689 |
|
|
|
38,088,860 |
|
|
|
36,441,497 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Stock
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Equity
|
|
Balance,
December 31, 2008
|
|
|
37,845,167 |
|
|
$ |
37,846 |
|
|
$ |
24,889,586 |
|
|
$ |
(197,704 |
) |
|
$ |
(15,258,506 |
) |
|
$ |
9,471,222 |
|
Cumulative
effect of change in accounting principle
|
|
|
- |
|
|
|
- |
|
|
|
(1,864,466 |
) |
|
|
- |
|
|
|
1,444,452 |
|
|
|
(420,014 |
) |
Common
stock issued to eliminate or modify price protection for
warrants
|
|
|
705,000 |
|
|
|
704 |
|
|
|
507,793 |
|
|
|
- |
|
|
|
- |
|
|
|
508,497 |
|
Common
stock and warrants issued under private placement, net of placement
fees
|
|
|
2,500,000 |
|
|
|
2,500 |
|
|
|
2,254,500 |
|
|
|
- |
|
|
|
- |
|
|
|
2,257,000 |
|
Common
stock issued to extend debt maturity date
|
|
|
10,000 |
|
|
|
10 |
|
|
|
11,990 |
|
|
|
- |
|
|
|
- |
|
|
|
12,000 |
|
Common
stock issued in lieu of cash to pay accrued interest
|
|
|
11,055 |
|
|
|
11 |
|
|
|
13,255 |
|
|
|
- |
|
|
|
- |
|
|
|
13,266 |
|
Common
stock issued for services rendered and to be rendered
|
|
|
150,000 |
|
|
|
150 |
|
|
|
185,850 |
|
|
|
- |
|
|
|
- |
|
|
|
186,000 |
|
Stock
- based compensation
|
|
|
7,031 |
|
|
|
7 |
|
|
|
1,338,236 |
|
|
|
- |
|
|
|
- |
|
|
|
1,338,243 |
|
Unrealized
loss on available for sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(863,650 |
) |
|
|
- |
|
|
|
(863,650 |
) |
Net
loss
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,001,076 |
) |
|
|
(1,001,076 |
) |
Balance,
June 30, 2009
|
|
|
41,228,253 |
|
|
$ |
41,228 |
|
|
$ |
27,336,744 |
|
|
$ |
(1,061,354 |
) |
|
$ |
(14,815,130 |
) |
|
$ |
11,501,488 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
loss
|
|
$ |
(1,001,076 |
) |
|
$ |
(7,683,047 |
) |
Add
back loss from discontinued operations, net
|
|
|
1,220 |
|
|
|
1,560,154 |
|
Loss
from continuing operations
|
|
|
(999,856 |
) |
|
|
(6,122,893 |
) |
Adjustments
to reconcile net loss from continuing operations to net cash used in
operating activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
1,353,743 |
|
|
|
976,553 |
|
Change
in fair value of warrant derivative liability
|
|
|
232,061 |
|
|
|
- |
|
Depreciation
|
|
|
147,364 |
|
|
|
106,223 |
|
Amortization
of intangible assets
|
|
|
99,520 |
|
|
|
209,367 |
|
Loss
on sale of available for sale securities
|
|
|
36,349 |
|
|
|
- |
|
Amortization
of debt issue costs
|
|
|
21,583 |
|
|
|
77,505 |
|
Amortization
of debt discount
|
|
|
500 |
|
|
|
1,118,242 |
|
Equity
method pick up from investment
|
|
|
- |
|
|
|
249,128 |
|
Write
off of deferred acquisition costs
|
|
|
- |
|
|
|
96,954 |
|
Loss
on settlement of debt
|
|
|
- |
|
|
|
20,121 |
|
Provision
for bad debts
|
|
|
(160,392 |
) |
|
|
102,236 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase
in accounts receivable
|
|
|
(2,968,432 |
) |
|
|
(136,399 |
) |
(Increase)
decrease in prepaid expenses and other current assets
|
|
|
(107,523 |
) |
|
|
12,459 |
|
Increase
in other assets
|
|
|
- |
|
|
|
(38,665 |
) |
Increase
in accounts payable
|
|
|
1,083,434 |
|
|
|
211,864 |
|
Increase
in accrued expenses
|
|
|
292,816 |
|
|
|
53,989 |
|
Increase
in accrued interest
|
|
|
1,346 |
|
|
|
85,791 |
|
Increase
in deferred revenue
|
|
|
133,576 |
|
|
|
83 |
|
Increase
in deferred rent
|
|
|
11,257 |
|
|
|
- |
|
Net
cash used in operating activities
|
|
|
(822,654 |
) |
|
|
(2,977,442 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
(73,883 |
) |
|
|
(177,991 |
) |
Proceeds
from sales of property and equipment
|
|
|
- |
|
|
|
13,000 |
|
Proceeds
from sale of available for sale securities
|
|
|
21,429 |
|
|
|
- |
|
Deferred
acquisition costs
|
|
|
- |
|
|
|
(10,619 |
) |
Net
cash used in investing activities
|
|
|
(52,454 |
) |
|
|
(175,610 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from common stock and warrants issued for cash
|
|
|
2,257,000 |
|
|
|
2,536,500 |
|
Proceeds
from factor, net
|
|
|
1,574,859 |
|
|
|
- |
|
Principal
payments on notes payable
|
|
|
(100,000 |
) |
|
|
(2,750,000 |
) |
Principal
payments on capital leases
|
|
|
(5,636 |
) |
|
|
(3,814 |
) |
Net
cash provided by (used in) financing activities
|
|
|
3,726,223 |
|
|
|
(217,314 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations:
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
- |
|
|
|
(1,251,172 |
) |
Cash
flows from investing activities-acquisition
|
|
|
- |
|
|
|
(1,605,921 |
) |
Cash
flows from investing activities-divestiture
|
|
|
(250,000 |
) |
|
|
3,000,000 |
|
Net
cash used in (provided by) discontinued operations
|
|
|
(250,000 |
) |
|
|
142,907 |
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
2,601,115 |
|
|
|
(3,227,459 |
) |
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
183,871 |
|
|
|
3,675,483 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$ |
2,784,986 |
|
|
$ |
448,024 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
192,267 |
|
|
$ |
97,337 |
|
Income
taxes paid
|
|
$ |
- |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Unrealized
loss on available for sale securities
|
|
$ |
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 |
|
|
$ |
- |
|
Issuance
of common stock and warrants in business combination
|
|
$ |
- |
|
|
$ |
5,746,442 |
|
Issuance
of common stock and warrants in debt settlement
|
|
$ |
- |
|
|
$ |
611,000 |
|
Issuance
of common stock for services rendered and to be rendered
|
|
$ |
- |
|
|
$ |
189,000 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
Note 1. Nature of Operations and Basis of
Presentation
Overview
Outsiders
Entertainment, Inc. was incorporated on March 4, 2002, under the laws of the
State of Delaware. On August 28, 2007, the name was changed to Customer
Acquisition Network Holdings, Inc. On June 25, 2008, the name was
changed to interCLICK, Inc. (the “Company”).
Customer
Acquisition Network, Inc. (“CAN”) was formed in Delaware on June 14,
2007.
On August 28, 2007, Customer Acquisition Network Holdings, Inc.
("Holdings") entered into an Agreement and Plan of Merger and Reorganization
(the “CAN Merger Agreement”) by and among Holdings, Customer Acquisition
Network, Inc. ("CAN"), and CAN Acquisition Sub Inc., a newly formed,
wholly-owned Delaware subsidiary of Holdings (“CAN Acquisition Sub”). The
merger transaction contemplated under the CAN Merger Agreement (the “CAN
Merger”) was consummated on August 28, 2007, at which time CAN Acquisition Sub
was merged with and into CAN, and CAN, as the surviving corporation, became a
wholly-owned subsidiary of Holdings.
On August
31, 2007, the Company entered into and consummated an Agreement and Plan of
Merger (the “Desktop Merger”), wherein the Company acquired 100% of Desktop
Interactive, Inc. (“Desktop”), a privately held Delaware corporation engaged in
the Internet advertising business.
On
January 4, 2008, Holdings consummated an Agreement and Plan of Merger (the
“Options Merger”), wherein Holdings formed, Options Acquisition Sub, Inc.
(“Options Acquisition”), and Options Newsletter, Inc. (“Options Newsletter” or
"Options") was merged with and into Options Acquisition, which was the surviving
corporation and a wholly-owned subsidiary of Holdings. 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 and cash flows for the
three and six months ended June 30, 2009 and 2008 and our financial position as
of June 30, 2009 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, 2008, as filed
with the SEC on March 31, 2009.
Note 2. Liquidity
Although
the Company has had historical net losses and net cash used in operations
through June 30, 2009, the Company's revenues and gross margins have experienced
positive trends and cash used in operations has decreased quarter over quarter
in 2009. In June 2009, the Company completed a private placement
resulting in net proceeds of $2,257,000. As a result, at June 30,
2009, the Company had cash of $2,784,986 and positive working capital of
approximately $1,711,329. The Company also has a factoring agreement (the
unused amount under the Crestmark Commercial Capital Lending, LLC (“Crestmark”)
line of credit was $1,374,421 at June 30, 2009) that allows the Company to
convert accounts receivable quickly to cash. For all of these
reasons, the Company expects that it has sufficient cash and borrowing capacity
to meet its working capital needs for at least the next twelve
months.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
Note
3. 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, purchase price fair value allocation for business
combinations, 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 capital stock, options and warrants granted for
services or recorded as debt discounts, or other non-cash purposes including
business combinations, the estimate of the valuation allowance on deferred tax
assets and estimates of the tax effects of business combinations and sale of
subsidiary, and estimates in equity investee’s losses.
Principals
of Consolidation
The
consolidated financial statements include the accounts of interCLICK, Inc. and
its wholly-owned subsidiary and Options Acquisition through its sale date.
All significant inter-company balances and transactions have been
eliminated in the consolidation. As a result of the Options
Divestiture, the results of Options Acquisition are reported as “Discontinued
Operations”.
Fair
Value of Financial Instruments
The
Company’s financial instruments, including cash and cash equivalents, accounts
receivable, notes payable, 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.
Fair
Value
On
January 1, 2008, the Company adopted the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value as used in
numerous accounting pronouncements, establishes a framework for measuring fair
value and expands disclosure of fair value measurements. In
February 2008, the Financial Accounting Standards Board (“FASB”) issued
FASB Staff Position, “FSP FAS 157-2—Effective Date of FASB Statement
No. 157” (“FSP 157-2”), which delays the effective date of SFAS 157 for one
year for certain nonfinancial assets and nonfinancial liabilities, except those
that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually). Excluded from the scope of SFAS 157
are certain leasing transactions accounted for under SFAS No. 13,
“Accounting for 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
SFAS 157.
Reclassifications
Certain
amounts in the accompanying 2008 financial statements have been reclassified to
conform to the 2009 presentation.
Discontinued
Operations
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 unaudited condensed consolidated financial
statements, in accordance with Statement of Financial Accounting Standards No.
144 “Accounting for the Impairment or Disposal of Long-Lived
Assets”. In addition, certain allocable corporate expenses pertaining
to Options Acquisition are also included in 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 Statement of Financial Accounting Standards 133
“Accounting for Derivative Instruments and Hedging Activities” and related
interpretations including EITF 00-19 “Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”
(“EITF 00-19”) and EITF Issue No. 07-5, “Determining Whether an Instrument (or
Embedded Feature) Is Indexed to an Entity’s Own Stock” (“EITF
07-5”). 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
SFAS 133 are reclassified to liability at the fair value of the instrument on
the reclassification date.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
Cumulative
Effect of Change in Accounting Principle
On
January 1, 2009, the Company adopted EITF 07-5 and, as a result, determined that
certain of its warrants previously issued contain round-down protection (price
protection) and such instruments are not considered indexed to a company’s own
stock because neither the occurrence of a sale of common stock by the Company at
market nor the issuance of another equity-linked instrument with a lower strike
price is an input to the fair value of a fixed-for-fixed option on equity
shares. Accordingly, the warrants with price protection qualify as
derivatives and need to be separately accounted for as a liability under
Statement of Financial Accounting Standards 133 “Accounting for Derivative
Instruments and Hedging Activities”. In accordance with EITF 07-5,
the cumulative effect of the change in accounting principle has been applied
retrospectively and has been recognized as an adjustment to the opening balance
of equity. The cumulative-effect adjustment amounts recognized in the
statement of financial position as a result of the initial adoption of this
policy were determined based on the amounts that would have been recognized if
the policy had been applied from the issuance date of the instrument. As a
result of the accounting change, the accumulated deficit as of January 1, 2009
decreased from $15,258,506, as originally reported, to $13,814,054 and
additional paid-in capital decreased from $24,889,586, as originally reported,
to $23,025,120.
Recently
Issued Accounting Standards
In June
2008, the Emerging Issues Task Force of the FASB issued EITF Issue No. 07-5,
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock, which is effective for fiscal years ending after December
15, 2008, with earlier application not permitted by entities that has previously
adopted an alternative accounting policy. The adoption of EITF 07-5’s
requirements will affect accounting for convertible instruments and warrants
with provisions that protect holders from declines in the stock price
(“round-down” provisions). Warrants with such provisions will no longer be
recorded in equity. EITF 07-5 guidance is to be applied to outstanding
instruments as of the beginning of the fiscal year in which the Issue is
applied. The cumulative effect of the change in accounting principle shall
be recognized as an adjustment to the opening balance of retained earnings (or
other appropriate components of equity) for that fiscal year, presented
separately. The cumulative-effect adjustment is the difference between the
amounts recognized in the statement of financial position before initial
application of this Issue and the amounts recognized in the statement of
financial position at initial application of this Issue. The amounts
recognized in the statement of financial position as a result of the initial
application of this Issue shall be determined based on the amounts that would
have been recognized if the guidance in this Issue had been applied from the
issuance date of the instrument. The Company implemented this standard on
January 1, 2009.
Note
4. Notes Payable, Factor Agreement and Other Obligations
Notes
Payable
Notes
Payable consisted of the following at June 30, 2009 and December 31,
2008:
|
|
June
30,
|
|
|
December
31,
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
6%
Senior secured promissory note payable - related party (due December 31,
2009)
|
|
$ |
200,000 |
|
|
$ |
400,000 |
|
6%
Convertible note payable - related party
|
|
|
100,000 |
|
|
|
- |
|
Less:
Debt discount
|
|
|
(11,500 |
) |
|
|
- |
|
Less:
Current maturities
|
|
|
(288,500 |
) |
|
|
(400,000 |
) |
Amount
due after one year
|
|
$ |
- |
|
|
$ |
- |
|
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
On June
5, 2009, the Company and the noteholder agreed to extend the maturity date for
$100,000 of the notes payable from June 30, 2009 to December 31,
2009. In exchange, this portion of the notes payable was converted to
a 6% unsecured convertible note, convertible at the rate of $2.00 per
share. The modification of this debt instrument is substantial and,
therefore under generally accepted accounting principles, the debt is deemed to
be extinguished and replaced with new debt. The conversion feature is
the only consideration given to the noteholder for the maturity date
extension. As the conversion feature’s exercise price exceeded the
quoted trade price of the underlying stock at the date of the modification, it
did not have any intrinsic value. Accordingly, the Company has not
recorded any entries pertaining to the aforementioned replacement of the
noteholder’s
debt.
On June
22, 2009, the Company repaid $100,000 of the senior secured notes
payable. In addition, the Company and the noteholder agree to extend
the maturity date for the remaining $200,000 of the notes payable from June 30,
2009 to December 31, 2009. In exchange, the noteholder received
10,000 shares of the Company’s common stock having a fair value of $12,000,
which is treated as debt discount and is being amortized over the remaining term
of the debt. Additionally, the Company issued 11,055 shares of common
stock in lieu of cash as payment for $13,266 of accrued interest related to the
notes payable.
Accrued
interest related to above notes at June 30, 2009 and December 31, 2008 was
$5,028 and 16,948, respectively.
Factor
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 to finance certain eligible accounts receivable of the Company, as
defined in the Agreement, up to a maximum credit line of $3.5 million (increased
to $4.5 million on February 3, 2009 and to $5.5 million on April 30, 2009),
which would represent gross factored 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,
2009) and is secured by all of the Company’s assets except property and
equipment financed elsewhere and the Company’s investment in OPMG shares, which
have been pledged to secure the GRQ Notes. In addition, the Company
pays 0.575% per 30 days on each 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 renews automatically unless terminated by either party not less than
30 days and not more than 90 days prior to the next anniversary
date. The balance due on the Crestmark credit facility at June 30,
2009 was $4,125,579, which is net of the 20% reserve of $1,034,712 that is
presented as Due from factor, a current asset. The unused amount
under the line of credit available to the Company at June 30, 2009 was
$1,374,421.
The
following is a summary of accounts receivable factored as well as factor fees
incurred for the three and six months ended June 30, 2009:
|
|
For
the Three
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2009
|
|
|
|
|
|
|
|
|
Accounts
receivable factored
|
|
$ |
9,134,370 |
|
|
$ |
15,708,010 |
|
|
|
|
|
|
|
|
|
|
Factoring
fees incurred
|
|
$ |
150,625 |
|
|
$ |
247,487 |
|
Note
5. Net Loss per Share
Basic
earnings per share are computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share are
computed using the weighted average number of common and potentially dilutive
securities outstanding during the period. Potentially dilutive
securities consist of the incremental common shares issuable upon exercise of
stock options and warrants (using the treasury stock method) as well as
nonvested common shares and convertible debt. Potentially dilutive
securities are excluded from the computation if their effect is
anti-dilutive. The potentially dilutive securities outstanding at
June 30, 2009 and 2008 have not been included in the calculation of the net loss
per share as such effect would have been anti-dilutive. As a result,
the basic and diluted loss per share amounts are identical for all periods
presented.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
At June
30, 2009, there were options to purchase 8,107,500 shares of common stock,
warrants to purchase 2,252,050 shares of common stock, 49,219 nonvested common
shares and $100,000 of convertible debt which, if exercised or converted, may
dilute future earnings per share.
Note
6. Stockholders’ Equity
Preferred
Stock
The
Company is authorized to issue up to 10,000,000 shares of $0.001 par value
preferred stock of which none was issued and outstanding at June 30, 2009 and
December 31, 2008.
Common
Stock
The
Company is authorized to issue up to 140,000,000 shares of $0.001 par value
common stock of which 41,228,253 and 37,845,167 shares were issued and
outstanding at June 30, 2009 and December 31, 2008, respectively.
During
the period from May 18, 2009 through June 17, 2009, the Company entered into
separate agreements with several of the investors that had purchased equity
units in the Company during 2008. These equity units had consisted of
shares of common stock and warrants both of which contained price protection
clauses. As a result of these agreements, the Company issued 705,000
shares of its common stock in exchange for (i) the elimination of price
protection on 1,300,000 shares of common stock, the elimination of price
protection on 629,880 warrants, and (iii) the repricing of warrants to purchase
545,130 shares of the Company’s common stock at an exercise price of $2.50 per
share to $1.40 per share. Accordingly, the warrant derivative
liability was valued at the date of the agreement relinquishing the price
protection clauses and the difference was recorded to change in fair value of
warrant derivative liability on the accompanying unaudited consolidated
statement of operations. Then, the pertinent portion of the warrant
liability of $508,497 was reclassified to equity by an increase in common stock
of $704 and an increase in additional paid-in capital of $507,793.
On June
1, 2009, the Company issued 150,000 shares of common stock to a consultant for
services to be rendered over a 12-month period. The shares have a
fair value of $186,000, of which $15,500 was recognized as of June 30, 2009, and
the remaining $170,500 remains deferred and is included in prepaid expenses and
other current assets on the accompanying unaudited consolidated balance
sheet.
On June
22, 2009, the Company issued 10,000 shares of common stock having a fair
value of $12,000 in order to extend the maturity date for a portion of its notes
payable (See Note 4). Additionally, the Company issued 11,055 shares
of common stock to settle $13,266 of accrued interest related to the notes
payable (See Note 4).
On June
22, 2009, the Company closed a private placement whereby the Company sold to
four investors (one of whom was a Co-Chairman of the Company’s Board of
directors) (i) 2,500,000 shares of its common stock and (ii) three-year warrants
to purchase 625,000 shares of its common stock at an exercise price of $1.40 per
share for gross proceeds of $2,500,000, of which $243,000 and three-year
warrants to purchase 225,000 shares of its common stock at an exercise price of
$1.40 per share was paid in direct placement costs. As part of the
private placement, the Company agreed to file a registration statement within 60
days of closing and that said registration statement would be declared effective
within 120 days of closing, subject to liquidated damages of 1% per month if the
registration statement is not declared effective within the required time period
for any reason.
Warrant
Grants
On June
22, 2009, as part of a private placement, the Company issued three-year warrants
to purchase 850,000 shares of its common stock exercisable at $1.40 per share
(See above).
A summary
of the Company’s warrant activity during the six months ended June 30, 2009 is
presented below:
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
No.
of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance
Outstanding, 12/31/08
|
|
|
1,402,050 |
|
|
$ |
2.34 |
|
|
|
|
|
|
|
Granted
|
|
|
850,000 |
|
|
|
1.40 |
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Balance
Outstanding, 06/30/09
|
|
|
2,252,050 |
|
|
$ |
1.72 |
|
|
|
3.4 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
06/30/09
|
|
|
2,252,050 |
|
|
$ |
1.72 |
|
|
|
3.4 |
|
|
$ |
- |
|
Certain
of the Company’s warrants contain round-down protection (price protection),
which caused the warrants to be treated as derivatives. The fair
value of the warrant derivative liability was $143,578 as of June 30, 2009 and
has been recorded as a liability in the accompanying unaudited condensed
consolidated balance sheet. The $232,061 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 during the six
months ended June 30, 2009 has been recorded in the accompanying unaudited
condensed consolidated statement of operations as Other income
(expense).
Stock
Incentive Plan and Option Grants
On
February 6, 2009, the Company increased the number of shares of common stock
eligible for grant under the 2007 Incentive Stock and Award Plan (the
“Plan”) from 1,000,000 to 1,225,000 common shares. In addition,
the 2007 Equity Incentive Plan shall be deemed fully used with 4,500,000 shares
reserved and any remaining shares available for grant, including the new 225,000
shares, shall be under the Plan. On June 5, 2009, the Company
increased the number of shares of common stock eligible for grant under the Plan
from 1,225,000 to 3,725,000 common shares. On July 27, 2009, the
Company increased the number of shares of common stock eligible for grant under
the Plan from 3,725,000 to 4,225,000 shares of common stock (See Note
10).
On
February 6, 2009, the Company granted 620,000 stock options (all of which were
under the Plan) at an exercise price of $0.76 having an aggregate fair value of
$384,400 all of which expire five years from the grant date. Of the
options granted, (i) 220,000 were issued to officers and vested immediately and
(ii) 400,000 were issued to an employee and vest in equal increments over
a four-year period each June 30 and December 31 commencing June 30, 2009,
subject to continued employment by the Company.
During
the three months ended June 30, 2009, the Company granted 2,667,500 stock
options (of which 2,367,500 were under the Plan) at various exercise prices
ranging from $1.20 to $1.30 having an aggregate fair value of $2,873,850 all of
which expire five years from the grant date. Of the options granted,
(i) 1,200,000 were issued to officers and vest in equal increments
quarterly over a four-year period commencing June 30, 2009, (ii) 300,000
were issued to a director and vest in equal increments quarterly over
a four-year period commencing June 30, 2009 (iii) 1,167,500 were issued to
employees of which 400,000 vest in equal increments quarterly over
a four-year period commencing June 30, 2009 and 767,500 vest annually over
a three-year period subject to continued employment by the
Company.
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 SFAS 123R
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 following table summarizes the
assumptions the Company utilized to record compensation expense for stock
options granted during the six months ended June 30, 2009:
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
Assumptions
|
|
June 30, 2009
|
|
Expected
life (years)
|
|
|
5 |
|
Expected
volatility
|
|
|
117.2%
- 121.4 |
% |
Risk-free
interest rate
|
|
|
1.89%
- 2.86 |
% |
Dividend
yield
|
|
|
0.00 |
% |
The
expected volatility is based on historical volatility. The expected
term is based on the contractual term. 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 lower expected volatility was used, or if the expected
dividend yield increased.
A summary
of the Company’s stock option activity during the six months ended June 30, 2009
is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
No.
of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance
Outstanding, 12/31/08
|
|
|
5,075,954 |
|
|
$ |
1.50 |
|
|
|
|
|
|
|
Granted
|
|
|
3,287,500 |
|
|
|
1.19 |
|
|
|
|
|
|
|
Exercised
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(140,000 |
) |
|
|
1.31 |
|
|
|
|
|
|
|
Expired
|
|
|
(115,954 |
) |
|
|
1.00 |
|
|
|
|
|
|
|
Balance
Outstanding, 06/30/09
|
|
|
8,107,500 |
|
|
$ |
1.39 |
|
|
|
4.1 |
|
|
$ |
830,900 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
06/30/09
|
|
|
2,268,541 |
|
|
$ |
1.30 |
|
|
|
3.6 |
|
|
$ |
409,967 |
|
The
weighted-average grant-date fair value of options granted during the six months
ended June 30, 2009 was $0.99.
Nonvested
Common Stock Grants
On
February 27, 2009, the Company granted 56,250 shares of restricted common
stock having a fair value of $56,250 (based on a quoted trading price of $1.00
per share) to an officer. The shares were issued under the 2007
Incentive Stock and Award Plan and vest in equal increments over
a four-year period each June 30 and December 31 commencing June 30, 2009,
subject to continued employment by the Company.
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant
Date
|
|
Nonvested Shares
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested
at December 31, 2008
|
|
|
- |
|
|
$ |
- |
|
Granted
|
|
|
56,250 |
|
|
|
1.00 |
|
Vested
|
|
|
(7,031 |
) |
|
|
1.00 |
|
Forfeited
|
|
|
- |
|
|
|
- |
|
Nonvested
at June 30, 2009
|
|
|
49,219 |
|
|
$ |
1.00 |
|
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
As of
June 30, 2009, there was $6,252,905 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 1.5
years.
Note
7. Commitments and Contingencies
Settlement
with Former Owner of Options Newsletter
As part
of the Options Merger, the Company became obligated to pay up to an additional
$1 million (the “Earn-Out”) if certain gross revenues are achieved for the one
year period subsequent to the Options Merger payable 60 days after the end of
each of the quarters starting with March 31, 2008. On September 30,
2008, the Company entered into a settlement agreement with the former owner of
Options Media to settle all amounts due under the $1 million Earn-Out and the
January 4, 2008 employment agreement whereby the Company agreed to pay $600,000
upon execution of the settlement agreement and $500,000, payable in two equal
installments on October 30, 2008 and January 15, 2009. The $1,100,000
in payments was discounted to a net present value of $1,090,230 using a discount
rate of 12%. In addition, all stock options previously granted to the
former owner of Options Media became fully vested immediately. As of
March 31, 2009, the Company had paid the entire balance of the payable and
promissory note settlement liability.
Registration
Rights
On June
22, 2009, the Company closed a $2,500,000 private placement (See Note
6). As part of the offering, the Company is required to file a
registration statement within 60 days of the closing date of June 22,
2009. If the Company fails to file said registration statement by
August 21, 2009 (60 days after closing), the Company is obligated to pay
liquidated damages (in cash or common stock, at the Company’s option) equal to
1% per month of the total amount invested. In addition, the
registration statement must be declared effective within 120 days of
closing. If the registration statement is not declared effective by
October 20, 2009 (120 days after closing), the Company is obligated to pay
liquidated damages (in cash or common stock, at the Company’s option) equal to
1% per month of the total amount invested. The liquidated damages
will be suspended six months after the sale of the securities to each
investor. Rule 144 provides that as long as the Company files
required reports on Form 10-Q and 10-K, the shares may be publicly sold six
months after issuance. The maximum potential consideration that the
Company could be required to transfer under the registration payment arrangement
is $150,000. As of June 30, 2009, the Company concluded that it is
not probable that the Company will have to remit any payments to the investors
for failing to file a registration statement within 60 days or for failing to
obtain an effective registration statement within 120
days. Therefore, the Company has not accrued any liability pertaining
to the contingent liability to pay liquidated damages under a registration
payment arrangement stemming from the private placement that closed June 22,
2009.
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, 2009, 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
8. 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 three financial
institutions in the United States. The balance, at any given time, may
exceed Federal Deposit Insurance Corporation insurance limits of $250,000 per
institution. As of June 30, 2009 and 2008, there was approximately
$3,156,000 and $730,000, respectively, in excess of insurable
limits.
INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2009
(Unaudited)
Concentration
of Revenues and Accounts Receivable
For the
three and six months ended June 30, 2009 and 2008, the Company had significant
customers with individual percentage of total revenues equaling 10% or greater
as follows:
|
|
For
the Three
|
|
|
For
the Three
|
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
|
June 30, 2009
|
|
|
June 30, 2008
|
|
Customer
1
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
12.3 |
% |
|
|
0.0 |
% |
Customer
2
|
|
|
0.0 |
% |
|
|
14.8 |
% |
|
|
0.0 |
% |
|
|
11.9 |
% |
Customer
3
|
|
|
0.0 |
% |
|
|
9.1 |
% |
|
|
0.0 |
% |
|
|
15.4 |
% |
Totals
|
|
|
0.0 |
% |
|
|
23.9 |
% |
|
|
12.3 |
% |
|
|
27.3 |
% |
At June
30, 2009 and 2008, concentration of accounts receivable with significant
customers representing 10% or greater of accounts receivable was as
follows:
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2009
|
|
|
2008
|
|
Customer
1
|
|
|
10.1 |
% |
|
|
0.0 |
% |
Customer
2
|
|
|
0.0 |
% |
|
|
16.2 |
% |
Totals
|
|
|
10.1 |
% |
|
|
16.2 |
% |
Note
9. Related Party Transactions
Included
in revenues for the three and six months ended June 30, 2008 is approximately
$2,000 and $43,000, respectively, of revenue from a related party affiliate
which is controlled by one of our executive officers and directors who was one
of the former owners of Desktop, the company we acquired on August 31,
2007.
On
September 26, 2008, we sold senior secured promissory notes (the “GRQ
Notes”) in the original aggregate principal amount of $1,300,000 to one of our
Co-Chairman, of which $1,000,000 had been repaid as of June 30, 2009 (See
Note 4).
Note
10. Subsequent Events
On July
27, 2009, the Company increased the number of shares of common stock eligible
for grant under the Plan from 3,725,000 to 4,225,000 shares of common
stock.
Subsequent
to June 30, 2009 through July 10, 2009, the Company granted 327,500 stock
options (of which 27,500 were under the Plan) at various exercise prices ranging
from $1.18 to $1.24 having an aggregate fair value of $336,025 all of which
expire five years from the grant date. Of the options granted, (i)
300,000 were issued to a member on the advisory board and vest in equal
increments quarterly over a four-year period commencing September 30, 2009 and
(ii) 27,500 were issued to employees and vest annually over a three-year period
subject to continued employment by the Company.
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations.
|
The
following discussion and analysis should be read in conjunction with our
unaudited consolidated financial statements and related notes appearing
elsewhere in this report on Form 10-Q. In addition to historical information,
this discussion and analysis contains forward-looking statements that involve
risks, uncertainties, and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of
certain factors, including but not limited to those set forth under “Risk
Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008,
excluding the going concern risk factor.
Management’s
discussion and analysis of financial condition and results of operations is
based upon our unaudited consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these unaudited consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues, and expenses, and related
disclosure of contingent assets and liabilities. On an ongoing basis, we
evaluate our estimates and assumptions, including, but not limited to, those
related to revenue recognition, allowance for doubtful accounts, income taxes,
goodwill and other intangible assets, and contingencies. We base our estimates
on historical experience and on various other assumptions that are believed 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 and assumptions.
Company
Overview
interCLICK
provides Internet advertising solutions for Internet publishers and
advertisers. interCLICK operates the interCLICK Network, an online
advertising platform that combines advanced behavioral targeting with complete
data and inventory transparency, allowing advertisers to identify and track
their desired audience on an unprecedented level. We offer advanced proprietary
demographic, behavioral, contextual, geographic and retargeting technologies
across a network of name brand publishers to ensure the right message is
delivered to a precise audience in a brand friendly environment.
By
combining complete data and inventory transparency and advanced behavioral
targeting, interCLICK is taking the inefficiencies out of the buyer/seller
dynamic by allowing advertisers to achieve a direct response metric, whether it
is a click, lead or a sale. We believe that this fundamental
difference allows online marketers to achieve a better return on
investment while still being able to target the premium websites.
Significant
events which have affected our results of operations include:
|
·
|
In
the first six months of 2009, our revenues were $19,071,977 in contrast to
$8,235,596 for the same period in 2008, or an increase of
132%;
|
|
·
|
As
our revenues increased, our gross margins also increased substantially, as
our gross margins were 47.2% for the first six months of 2009 in contrast
to 25.7% for the same period of
2008;
|
|
·
|
We
achieved positive earnings before interest, taxes, depreciation and
amortization, including stock-based compensation for three
straight quarters beginning with the fourth quarter of
2008;
|
|
·
|
We
raised gross proceeds of $2,500,000 in our private placement that closed
on June 22, 2009; and
|
|
·
|
We
increased our credit line to $5,500,000 in April 2009 to support the
growth of our business.
|
Results
of Operations
The
following table presents our results of operations for the six months ended June
30, 2009 and 2008. It should be noted that our results of operations and our
liquidity and capital resources discussions focus primarily on the operations of
interCLICK while referring to Options Acquisition Sub, Inc. (“Options”) as a
discontinued operation.
|
|
For the
Six
Months Ended
June 30, 2009
|
|
|
For the Six
Months
Ended
June 30, 2008
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
19,071,977
|
|
|
$
|
8,235,596
|
|
Cost
of revenues
|
|
|
10,064,603
|
|
|
|
6,120,079
|
|
Gross
profit
|
|
|
9,007,374
|
|
|
|
2,115,517
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
9,498,559
|
|
|
|
6,742,421
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss) from continuing operations
|
|
|
(491,185)
|
|
|
|
(4,626,904
|
)
|
|
|
|
|
|
|
|
|
|
Total
other income (expense)
|
|
|
(508,671)
|
|
|
|
(1,246,861
|
)
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before equity investment
|
|
|
(999,856)
|
|
|
|
(5,873,765)
|
|
|
|
|
|
|
|
|
|
|
Equity
in investee’s loss, net of income taxes
|
|
|
-
|
|
|
|
(249,128)
|
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations
|
|
|
(999,856)
|
|
|
|
(6,122,893)
|
|
|
|
|
|
|
|
|
|
|
Loss
from discontinued operations, net of income taxes
|
|
|
(1,220)
|
|
|
|
(1,560,154)
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
$
|
(1,001,076)
|
|
|
|
(7,683,047)
|
|
|
|
|
|
|
|
|
|
|
Earnings
(loss) per share from continuing operations – basic and
diluted
|
|
$
|
(0.03)
|
|
|
|
(0.17)
|
|
Loss
per share from discontinued operations – basic and diluted
|
|
$
|
-
|
|
|
|
(0.04)
|
|
Net
earnings (loss) per share – basic and diluted
|
|
$
|
(0.03)
|
|
|
|
(0.21)
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding – basic
|
|
|
38,088,860
|
|
|
|
36,441,497
|
|
Weighted
average shares outstanding – diluted
|
|
|
38,088,860
|
|
|
|
36,441,497
|
|
Six
Months Ended June 30, 2009 Compared with The Six Months Ended June 30,
2008.
Revenues
Unless
otherwise indicated, the following discussion relates to our continuing
operations and does not include the operations of Options. We acquired that
business in January 2008 and sold it in June 2008 resulting in a net loss on
sale of $3,571,682.
Revenues
for the six months ended June 30, 2009 increased to $19,071,977 from $8,235,596
for the six months ended June 30, 2008, an increase of 132%. The increase is
primarily attributable to growth of our advertiser base through our expanded
national sales force and through budget increases among existing
advertisers.
Seasonally,
the third quarter marks the start of the stronger half of the year in terms of
demand for cost per thousand (“CPM”) advertising
campaigns. interCLICK is particularly sensitive to this seasonality
effect given that the majority of its revenues are tied to CPM campaigns.
Despite the marked deterioration of the broader economy over the past twelve
months and in 2009, the overall U.S. Internet audience based on comScore data
expanded to 193,532,000 average viewers in the second quarter of 2009, an
increase of 0.9%, as compared to the first quarter of 2009, and an increase of
1.6%, as compared to the second quarter of 2008. For the same periods
indicated, interCLICK experienced growth of 2.1% and 18.2%, respectively, as its
audience reach expanded rapidly based on signing more publishers and gaining
access to more inventory.
Given the
continued overall growth in online advertising, coupled with other strategic
initiatives undertaken by interCLICK, including the continued enhancement of our
behavioral targeting system and our continued ability to acquire top tier
publishing inventory, we expect to continue to increase our advertising customer
base and revenues on a year-over-year basis.
Revenues
from branded advertisers continue to account for the substantial majority of our
revenues. During the six months ended June 30, 2009, revenues from such
advertisers accounted for more than 95% of revenues.
Cost
of Revenues and Gross Profit
Cost of
revenues for the six months ended June 30, 2009 increased to $10,064,603 from
$6,120,079 for the six months ended June 30, 2008, an increase of 64.5%. The
increase is primarily attributable to the growth in advertising campaigns
requiring the purchase of appropriate levels of inventory from publishers. Cost
of revenues is comprised of the amounts we paid to website publishers on
interCLICK’s online advertising network. Cost of revenues represented 52.8% of
revenues for the six months ended June 30, 2009 compared to 74.3% of revenues
for the six months ended June 30, 2008. The decrease is primarily attributable
to: (1) improvements in our supply chain management platform, resulting in a
better match between acquired publisher inventory and advertising campaign
demand and (2) targeting efficiencies achieved through our proprietary
technology platform.
Gross
profit for the six months ended June 30, 2009 increased to $9,007,374 from
$2,115,517 for the six months ended June 30, 2008, an increase of 326%.
Our gross margin was 47.2% for the six months ended June 30, 2009 compared
to 25.7% for the six months ended June 30, 2008.
We pay
interCLICK’s website publishers on either a fixed CPM volume commitment basis or
on a revenue share basis. The amount of display advertisements we deliver (e.g.
impressions) reflects the level of publishing inventory we can acquire. Based on
our comScore ranking as of June 30, 2009, we reached 69.3% of the domestic
online population and are ranked as the 11th largest
ad network in the domestic online marketplace. We endeavor both to expand
our publisher base and to increase the levels of acquired publishing inventory,
particularly from tier one publishers.
Operating
Expenses:
General and Administrative
General
and administrative expenses consist primarily of executive and administrative
compensation, facilities costs, insurance, depreciation, professional fees and
investor relations fees. General and administrative expenses for the
six months ended June 30, 2009 increased to $3,894,487 from $3,139,705 for the
six months ended June 30, 2008, an increase of 24.0%. The increase is
primarily attributable to headcount expansion over the period. We
hired 21 employees in the second quarter to meet the expected growth trajectory
of our business, growing our employee base from 43 to 64
employees. We expect to continue hiring new employees for the balance
of 2009, albeit at a slower pace than in the second quarter. General
and administrative expenses represented 20.4% of revenues for the six months
ended June 30, 2009 compared to 38.1% of revenues for the six months ended June
30, 2008.
Included
in general and administrative expenses are non-cash stock based compensation,
which is comprised of expense from our stock and stock option plans and
amortization of warrants issued for consulting services. Non-cash
stock based compensation for the six months ended June 30, 2009 increased to
$1,353,743 from $976,553 for the six months ended June 30, 2008, an increase of
38.6%. The increase is primarily attributable to the award of
stock option grants to current as well as new employees. Non-cash
stock based compensation represented 7.1% of revenues for the six months ended
June 30, 2009 compared to 11.9% of revenues for the six months ended June 30,
2008. The remaining portion of stock-based expenses for the six months ended
June 30, 2008 totaling $159,700 is allocated to discontinued operations,
which are discussed below.
Future
non-cash compensation expense related to current unvested options, restricted
stock awards and warrants amounts to $6,252,905 as of June 30, 2009, of which
$1,234,060 will be amortized in the remainder of 2009.
Sales
and Marketing
Sales and
marketing expenses consist primarily of compensation for sales and marketing and
related support resources, sales commissions and trade show expenses. Sales and
marketing expenses for the six months ended June 30, 2009 increased to
$4,733,402 from $2,270,642 for the six months ended June 30, 2008, an increase
of 109%. The increase is primarily attributable to our national
sales-force expansion. Sales and marketing expenses represented 24.8%
of revenues for the six months ended June 30, 2009 compared to 27.6% of revenues
for the six months ended June 30, 2008.
Technology
Support
Technology
support consists primarily of compensation of technology support and related
consulting resources and third party ad server costs for interCLICK. Technology
support and related consulting support resources have been directed primarily
towards continued enhancement of our proprietary behavioral targeting platform,
including integration of third party data providers, upgrades to our
optimization system, and ongoing maintenance and improvement of our technology
infrastructure. Technology support expenses for the six months ended June
30, 2009 increased to $753,007 from $508,409 for the six months ended June 30,
2008, an increase of 48.1%. The increase is primarily attributable to
expenditures necessary to support interCLICK’s increased business as well as
expected increases in revenues. Technology support expenses represented 3.9% of
revenues for the six months ended June 30, 2009 compared to 6.2% of revenues for
the six months ended June 30, 2008.
Merger,
Acquisition, Divestiture and Investor Relations Costs
Merger,
acquisition, divestiture and investor relations costs consist primarily of
legal, audit and accounting services related to the acquisition and subsequent
divestiture of Options in addition to investor relations
services. Merger, acquisition, divestiture and investor
relations costs for the six months ended June 30, 2009 decreased to $178,535
from $512,062 for the six months ended June 30, 2008, a decrease of
65.1%. The decrease is primarily attributable to the
acquisition of Options in January 2008 and its subsequent divestiture in June
2008 whereas the 2009 costs consist primarily of investor
relations. Merger, acquisition, divestiture and investor
relations costs represented 0.9% of revenues for the six months ended June 30,
2009 compared to 6.2% of revenues for the six months ended June 30,
2008.
Amortization
of Intangible Assets
Amortization
of intangible assets includes amortization of customer relationships, developed
technology and a domain name acquired through the Desktop
acquisition. Amortization of intangible assets for the six months
ended June 30, 2009 decreased to $99,520 from $209,367 for the six months ended
June 30, 2008, a decrease of 52.5%. The decrease is primarily
attributable to the accelerated amortization applicable to acquired customer
relationships.
Amortization of intangible assets represented 0.5% of revenues for the six
months ended June 30, 2009 compared to 2.5% of revenues for the six months ended
June 30, 2008.
Loss
From Discontinued Operations, Net
Loss from
discontinued operations for the six months ended June 30, 2009 consists of a
loss on the sale of discontinued operations of $1,220. Loss from
discontinued operations for the six months ended June 30, 2008 consists of a
loss from discontinued operations of $935,173 and the loss on the sale of
discontinued operations of $624,981. The loss from discontinued operations for
the six months ended June 30, 2008 also contains $159,700 of stock-based
expense.
Three
Months Ended June 30, 2009 Compared with The Three Months Ended June 30,
2008.
Revenues
Unless
otherwise indicated, the following discussion relates to our continuing
operations and does not include the operations of Options. We acquired that
business in January 2008 and sold it in June 2008 resulting in a net loss on
sale of $3,571,682.
Revenues
for the three months ended June 30, 2009 increased to $10,648,686 from
$4,673,629 for the three months ended June 30, 2008, an increase of 128%. The
increase is primarily attributable to growth of our advertiser base through our
expanded national sales force and through budget increases among existing
advertisers.
Seasonally,
the third quarter marks the start of the stronger half of the year in terms of
demand for CPM advertising campaigns. interCLICK is particularly
sensitive to this seasonality effect given that the majority of its revenues are
tied to CPM campaigns. Despite the marked deterioration of the broader
economy over the past twelve months and in 2009, the overall U.S. Internet
audience based on comScore data expanded to 193,532,000 average viewers in the
second quarter of 2009, an increase of 0.9%, as compared to the first quarter of
2009, and an increase of 1.6%, as compared to the second quarter of 2008.
For the same periods indicated, interCLICK experienced growth of 2.1% and 18.2%,
respectively, as its audience reach expanded rapidly based on signing more
publishers and gaining access to more inventory.
Given the
continued overall growth in online advertising, coupled with other strategic
initiatives undertaken by interCLICK, including the continued enhancement of our
behavioral targeting system and our continued ability to acquire top tier
publishing inventory, we expect to continue to increase our advertising customer
base and revenues on a year-over-year basis.
Revenues
from branded advertisers continue to account for the substantial majority of our
revenues. During the three months ended June 30, 2009, revenues from such
advertisers accounted for more than 95% of revenues.
Cost
of Revenues and Gross Profit
Cost of
revenues for the three months ended June 30, 2009 increased to $5,624,005 from
$3,412,541 for the three months ended June 30, 2008, an increase of 64.8%. The
increase is primarily attributable to the growth in advertising campaigns
requiring the purchase of appropriate levels of inventory from publishers. Cost
of revenues is comprised of the amounts we paid to website publishers on
interCLICK’s online advertising network. Cost of revenues represented 52.8% of
revenues for the three months ended June 30, 2009 compared to 73.0% of revenues
for the three months ended June 30, 2008. The decrease is primarily attributable
to: (1) improvements in our supply chain management platform, resulting in a
better match between acquired publisher inventory and advertising campaign
demand and (2) targeting efficiencies achieved through our proprietary
technology platform.
Gross
profit for the three months ended June 30, 2009 increased to $5,024,681 from
$1,261,088 for the three months ended June 30, 2008, an increase of 298%.
Our gross margin was 47.2% for the three months ended June 30, 2009 compared to
27.0% for the three months ended June 30, 2008.
Operating
Expenses:
General
and Administrative
General
and administrative expenses consist primarily of executive and administrative
compensation, facilities costs, insurance, depreciation, professional fees and
investor relations fees. General and administrative expenses for the
three months ended June 30, 2009 increased to $2,414,255 from $1,410,607 for the
three months ended June 30, 2008, an increase of 71.2%. The increase is
primarily attributable to headcount expansion over the period. We
hired 21 employees in the second quarter to meet the expected growth trajectory
of our business, growing our employee base from 43 to 64
employees. We expect to continue hiring new employees for the balance
of 2009, albeit at a slower pace than in the second quarter. General
and administrative expenses represented 22.7% of revenues for the three months
ended June 30, 2009 compared to 30.2% of revenues for the three months ended
June 30, 2008.
Included
in general and administrative expenses are non-cash stock based compensation,
which is comprised of expense from our stock and stock option plans and
amortization of warrants issued for consulting services. Non-cash
stock based compensation for the three months ended June 30, 2009 increased to
$777,173 from $502,379 for the three months ended June 30, 2008, an increase of
54.7%. The increase is primarily attributable to the award of stock
option grants to current as well as new employees. Non-cash stock
based compensation represented 7.3% of revenues for the three months ended June
30, 2009 compared to 10.7% of revenues for the three months ended June 30, 2008.
The remaining portion of stock-based expenses for the three months ended June
30, 2008 totaling $62,580 is allocated to discontinued operations,
which are discussed below.
Future
non-cash compensation expense related to unvested options, restricted stock
awards and warrants amounts to $6,252,905 as of June 30, 2009, of which
$1,234,060 will be amortized in the remainder of 2009.
Sales
and Marketing
Sales and
marketing expenses consist primarily of compensation for sales and marketing and
related support resources, sales commissions and trade show expenses. Sales and
marketing expenses for the three months ended June 30, 2009 increased to
$2,691,096 from $1,445,894 for the three months ended June 30, 2008, an increase
of 86.1%. The increase is primarily attributable to our
national sales-force expansion. Sales and marketing expenses
represented 25.3% of revenues for the three months ended June 30, 2009 compared
to 30.9% of revenues for the three months ended June 30, 2008.
Technology
Support
Technology
support consists primarily of compensation of technology support and related
consulting resources and third party ad server costs for interCLICK. Technology
support and related consulting support resources have been directed primarily
towards continued enhancement of our proprietary behavioral targeting platform,
including integration of third party data providers, upgrades to our
optimization system, and ongoing maintenance and improvement of our technology
infrastructure. Technology support expenses for the three months ended
June 30, 2009 increased to $420,958 from $231,371 for the three months ended
June 30, 2008, an increase of 81.9%. The increase is primarily attributable to
expenditures necessary to support interCLICK’s increased business as well as
expected increases in revenues. Technology support expenses represented 4.0% of
revenues for the three months ended June 30, 2009 compared to 5.0% of revenues
for the three months ended June 30, 2008.
Merger,
Acquisition, Divestiture and Investor Relations Costs
Merger,
acquisition, divestiture and investor relations costs consist primarily of
legal, audit and accounting services related to the acquisition and subsequent
divestiture of Options in addition to investor relations
services. Merger, acquisition, divestiture and investor
relations costs for the three months ended June 30, 2009 decreased to
$113,156 from $274,903 for the three months ended June 30, 2008, a decrease of
58.8%. The decrease is primarily attributable to the
acquisition of Options in January 2008 and its subsequent divestiture in June
2008 whereas the 2009 costs consist primarily of investor
relations. Merger, acquisition, divestiture and investor
relations costs represented 1.1% of revenues for the three months ended
June 30, 2009 compared to 5.9% of revenues for the three months ended June 30,
2008.
Amortization
of Intangible Assets
Amortization
of intangible assets includes amortization of customer relationships, developed
technology and a domain name acquired through the Desktop
acquisition. Amortization of intangible assets for the three months
ended June 30, 2009 decreased to $49,760 from $104,630 for the three months
ended June 30, 2008, a decrease of 52.4%. The decrease is primarily
attributable to the accelerated amortization applicable to acquired customer
relationships. Amortization of intangible assets represented 0.5% of
revenues for the three months ended June 30, 2009 compared to 2.2% of revenues
for the three months ended June 30, 2008.
Loss
From Discontinued Operations, Net
Loss from
discontinued operations for the three months ended June 30, 2008 consists of a
loss from discontinued operations of $218,187 and the loss on the sale of
discontinued operations of $624,981. The loss from discontinued operations for
the three months ended June 30, 2008 also contains $62,580 of stock-based
expense.
Liquidity
and Capital Resources
Net cash
used in operating activities during the six months ended June 30, 2009 totaled
$822,654 and resulted primarily from a $2,968,432 increase in accounts
receivable and a $1,001,076 net loss, partially offset by $1,353,743 in
stock-based compensation, an increase in accounts payable of 1,083,434, an
increase in accrued expenses of $292,816, and a $232,061 change in fair value of
a warrant derivative liability.
Net cash
used in investing activities during the six months ended June 30, 2009 totaled
$52,454 and resulted from $73,883 of purchases of property and equipment, offset
by proceeds from the sale of Options Media Group Holdings, Inc. (“OPMG”) stock
of $21,429.
Net cash
provided by financing activities during the six months ended June 30, 2009 was
$3,726,223 and resulted primarily from net proceeds of $2,257,000 from a private
placement, $1,574,859 received under our credit facility (net of repayments),
partially offset by the repayment of $100,000 of notes payable.
On
September 26, 2008, Barry Honig, one of our Co-Chairmen, and GRQ Consultants,
Inc. 401(k) (an entity controlled by Mr. Honig) loaned interCLICK a total of
$1,300,000 and we issued to each $650,000 6% promissory notes. We
repaid Mr. Honig’s note in 2008 and as of December 31, 2008 owed GRQ $400,000,
which was due June 30, 2009. On June 5, 2009, the Board of Directors
approved an extension of the due date of $100,000 of the note from June 30, 2009
to December 31, 2009. In addition, this $100,000 note which was
previously not convertible was made convertible at $2.00 per
share. On June 22, 2009, interCLICK repaid $100,000 of the remaining
$300,000 non-convertible note and extended the due date of this remaining
non-convertible note to December 31, 2009. As of the date of this
report, GRQ holds a $200,000 6% secured promissory note and a $100,000 6%
promissory note convertible at $2.00 per share, each due December 31,
2009.
On
November 13, 2008, interCLICK entered into a revolving credit facility with
Crestmark Commercial Capital Lending, LLC to finance certain eligible accounts
receivables of interCLICK in an amount up to $3.5 million (increased to $4.5
million on February 3, 2009 and increased to $5.5 million on April 30,
2009). The line of credit expires on May 12, 2010 and is secured by
all of the assets of interCLICK except the OPMG shares.
At June
30, 2009, interCLICK had $2,784,986 in cash and cash equivalents and working
capital of $1,711,329. As of July 30, 2009, interCLICK had
approximately $2,700,000 of cash and cash equivalents. As
its business has expanded, interCLICK has had positive earnings before interest,
taxes, depreciation, and amortization including stock-based
compensation for the last three quarters. interCLICK continues to
expand and had record revenues in July 2009. Management anticipates
that revenues will continue to increase for at least the next 12
months. In addition to our $1,711,329 of working capital, the unused
amount under the Crestmark line of credit available was $1,374,421 at June 30,
2009. interCLICK is in advanced discussions to increase this line of
credit. For all of these reasons, interCLICK expects that it has
sufficient cash and borrowing capacity to meet its working capital needs for at
least the next 12 months.
In the
next 12 months, we expect to acquire up to $2,000,000 in capital assets to
establish the appropriate scale of technology assets necessary both to support
the realization of growth objectives as well as to advance interCLICK’s present
competitive position. We expect these capital assets will be acquired through
conventional capital leases reducing our need to use available
cash.
Related
Party Transactions
No
related party transactions had a material impact on our operating
results. See Note 9 to our unaudited condensed consolidated financial
statements.
New
Accounting Pronouncements
See Note
3 to our unaudited condensed consolidated financial statements included in this
report for discussion of recent accounting pronouncements.
Critical
Accounting Estimates
In response to the SEC’s financial
reporting release, FR-60, Cautionary Advice Regarding Disclosure About Critical
Accounting Policies, the Company has selected its more subjective accounting
estimation processes for purposes of explaining the methodology used in
calculating the estimate, in addition to the inherent uncertainties pertaining
to the estimate and the possible effects on the interCLICK’s financial
condition. The two accounting estimates are discussed below. These estimates
involve certain assumptions that if incorrect could create a material adverse
impact on the interCLICK’s results of operations and financial
condition. See Note 3 to the unaudited condensed consolidated
financial statements.
With the present economic recession,
management is particularly attentive to the potential for lengthening account
receivable collection cycles and the attendant possibility of an increase in bad
debts. However, as collection performance improved over the course of the first
quarter of 2009 in part due to a major retailer client receiving an $80,000,000
capital investment, management opted to reduce bad debt reserves to $185,032, or
1.8% of gross accounts receivable at June 30, 2009, from $216,532 or 2.5% of
gross accounts receivable, at March 31, 2009.
Aside from bad debt reserves and
write-offs, management is sensitive to the carrying value of the 7,285,715 OPMG
shares currently held on the balance sheet at $728,572 which are valued based on
the shares we sold privately in July 2009.
Forward
Looking Statements
The
statements in this report relating to our belief that our online marketers
achieve a better rate of return on investment while still being able to target
premium websites, our expectations that our advertising customer base and
revenues will increase, our expectations that revenues from large branded
advertisers will continue to grow as our advertising customer base, our growth,
expectations regarding hiring additional employees, our efforts to expand our
publisher base and increase levels of publishing inventory and our expectations
regarding future liquidity, revenues and capital expenditures are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Additionally, words such as “expects,”
“anticipates,” “intends,” “believes,” “will” and similar words are used to
identify forward-looking statements.
Some or
all of the results anticipated by these forward-looking statements may not
occur. Important factors, uncertainties and risks that may cause actual
results to differ materially from these forward-looking statements include, but
are not limited to, the impact of intense competition, the continuation or
worsening of current economic conditions and the condition of the domestic and
global credit and capital markets. For more information regarding
some of the ongoing risks and uncertainties of our business, see the Risk
Factors contained in our Form 10-K for the year ended December 31,
2008 excluding the going concern risk factor.
Item 3.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Not
applicable to smaller reporting companies
Item
4.
|
Controls
and Procedures.
|
Not
applicable to smaller reporting companies
Item
4T.
|
Controls
and Procedures.
|
Disclosure
Controls
We
carried out an evaluation required by Rule 13a-15 or Rule 15d-15 of the
Securities Exchange Act of 1934 (the “Exchange Act”) under the supervision and
with the participation of our management, including our Principal Executive
Officer and Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures.
Disclosure
controls and procedures are designed with the objective of ensuring that (i)
information required to be disclosed in an issuer's reports filed under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms and (ii) information is accumulated
and communicated to management, including our Principal Executive Officer and
Principal Financial Officer, as appropriate to allow timely decisions regarding
required disclosures.
The
evaluation of our disclosure controls and procedures included a review of our
objectives and processes and effect on the information generated for use in this
report. This type of evaluation is done quarterly so that the conclusions
concerning the effectiveness of these controls can be reported in our periodic
reports filed with the SEC. We intend to maintain these controls as processes
that may be appropriately modified as circumstances warrant.
Based on
their evaluation, our Principal Executive Officer and Principal Financial
Officer have concluded that our disclosure controls and procedures are effective
in timely alerting them to material information which is required to be included
in our periodic reports filed with the SEC as of the filing of this
report.
Changes in Internal Controls
Over Financial Reporting
There
were no changes in our internal control over financial reporting that
occurred during the period covered by this report that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.
PART
II – OTHER INFORMATION
Item
1.
|
Legal
Proceedings.
|
None
Not
applicable to smaller reporting companies
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds.
|
In
addition to those unregistered securities previously disclosed in reports filed
with the SEC, we have sold securities without registration under the Securities
Act of 1933 in reliance upon the exemption provided in Section 4(2) and
Rule 506 thereunder as described below.
Name or Class of Investor (1)
|
|
Date Sold
|
|
No. of Securities
|
|
Reason for Issuance
|
|
|
|
|
|
|
|
Investors
|
|
May
29, 2009 through June 24, 2009
|
|
705,000
shares of common stock
|
|
Waiver
of anti-dilution provision in warrants
|
Consultant
|
|
June
2, 2009
|
|
150,000
shares of common stock
|
|
Consulting
services
|
Executives
|
|
June
5, 2009
|
|
1,200,000
five-year stock options exercisable at $1.30 per share
|
|
Employee
grants
|
Employees
|
|
June
5, 2009 and June 8, 2009
|
|
1,075,000
five-year stock options exercisable at $1.30 per share
|
|
Employee
grants
|
Employees
|
|
June
10, 2009, June 22, 2009 and June 29, 2009
|
|
352,500
five-year stock options exercisable at $1.20 per share
|
|
Employee
grants
|
Employees
|
|
June
15, 2009
|
|
40,000
five-year stock options exercisable at $1.24 per share
|
|
Employee
grants
|
Finder
|
|
June
22, 2009
|
|
125,000
three-year warrants exercisable at $1.40 per share
|
|
Finders’
fees
|
Noteholder
|
|
June
29, 2009
|
|
10,000
shares of common stock
|
|
In
consideration for extending note
|
Noteholder
|
|
June
29, 2009
|
|
11,055
shares of common stock
|
|
In
lieu of paying cash for interest on
note
|
(1) While
the SEC only requires disclosure when options issued under an employee stock
option plan become exercisable, the Company has elected to disclose the issuance
as a matter of convenience.
Item
3.
|
Defaults
Upon Senior Securities.
|
None
Item
4.
|
Submission
of Matters to a Vote of Security
Holders.
|
None
Item
5.
|
Other
Information.
|
None
Certain
material agreements contain representations and warranties, which are qualified
by the following factors: (1) the representations and warranties contained in
any agreements filed with this report were made for the purposes of allocating
contractual risk between the parties and not as a means of establishing facts;
(2) the agreement may have different standards of materiality than standards of
materiality under applicable securities laws; (3) the representations are
qualified by a confidential disclosure schedule that contains nonpublic
information that is not material under applicable securities laws; (4) facts may
have changed since the date of the agreements; and (5) only parties to the
agreements and specified third-party beneficiaries have a right to enforce the
agreements.
No.
|
|
Description
|
|
|
|
|
|
|
|
2.1
|
|
Agreement
of Merger and Plan of Reorganization, by and among
Customer
Acquisition Network Holdings, Inc., Customer
Acquisition
Network, Inc. and CAN Acquisition Sub, Inc.
|
|
Contained
in Form 8-K filed September 4, 2007
|
2.2
|
|
Agreement
and Plan of Merger, by and among Customer
Acquisition
Network Holdings, Inc., Customer Acquisition Network, Inc.,
Desktop
Acquisition Sub, Inc., Desktop Interactive, Inc. and
Michael
Katz, Brandon Guttman and Stephen Guttman
|
|
Contained
in Form 8-K filed September 4, 2007
|
2.3
|
|
Certificate
of Merger, merging Customer Acquisition Sub, Inc.
with
and into Customer Acquisition Network Inc.
|
|
Contained
in Form 8-K filed September 4, 2007
|
2.4
|
|
Certificate
of Merger, merging Desktop Interactive, Inc. with
and
into Desktop Acquisition Sub, Inc.
|
|
Contained
in Form 8-K filed September 4, 2007
|
2.5
|
|
Agreement
of Merger and Plan of Reorganization, by and among
Options
Media Group Holdings, Inc., Options Acquisition Corp.,
Options
Acquisition Sub, Inc. and Customer Acquisition Network Holdings,
Inc.
|
|
Contained
in Form 8-K filed June 27, 2008
|
2.6
|
|
Certificate
of Merger, merging Options Acquisition Corp. with
and
into Options Acquisition Sub, Inc.
|
|
Contained
in Form 8-K filed September 4, 2007
|
3.1
|
|
Amended
and Restated Certificate of Incorporation
|
|
Contained
in Form 8-K filed August 30, 2007
|
3.2
|
|
Certificate
of Amendment to the Certificate of Incorporation
|
|
Contained
in Form 8-K filed July 7, 2008
|
3.3
|
|
Amended
and Restated Bylaws
|
|
Contained
in Form 8-K filed August 30, 2007
|
4.1
|
|
Barry
Honig Convertible Note
|
|
Contained
in this Form 10-Q
|
4.2
|
|
Barry
Honig 6% Senior Promissory Note
|
|
Contained
in this Form 10-Q
|
4.3
|
|
Form
of Warrant dated June 22, 2009
|
|
Contained
in this Form 10-Q
|
10.1
|
|
Accounts
Receivable Financing Agreement with Crestmark
Commercial
Capital Lending LLC
|
|
Contained
in Form 10-K filed March 31, 2009
|
10.2
|
|
Amendment
to the Accounts Receivable Financing Agreement
with
Crestmark Commercial Capital Lending LLC
|
|
Contained
in Form 10-K filed March 31, 2009
|
10.3
|
|
Letter
Agreement with Crestmark Commercial Capital Lending LLC increasing Line of
Credit
|
|
Contained
in Form 10-K filed March 31, 2009
|
10.4
|
|
Second
Amendment to the Accounts Receivable Financing
Agreement
with Crestmark Commercial Capital Lending LLC
|
|
Contained
in Form 10-K filed March 31, 2009
|
10.5
|
|
Stock
Pledge Agreement with Barry Honig and GRQ Consultants,
Inc.
|
|
Contained
in Form 8-K filed October 1, 2008
|
10.6
|
|
Letter
Agreement with Barry Honig and GRQ Consultants, Inc.
|
|
Contained
in Form 10-K filed March 31, 2009
|
10.7
|
|
Form
of Subscription Agreement
|
|
Contained
in this Form 10-Q
|
10.8
|
|
Form
of Registration Rights Agreement
|
|
Contained
in this Form 10-Q
|
31.1
|
|
Certification
of Principal Executive Officer (Section 302)
|
|
Contained
in this Form 10-Q
|
31.2
|
|
Certification
of Principal Financial Officer (Section 302)
|
|
Contained
in this Form 10-Q
|
32.1
|
|
Certification
of Chief Executive Officer and Chief Financial Officer
(Section 906)
|
|
Furnished
with this Form 10-Q
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
interCLICK,
INC.
|
|
|
|
August
11, 2009
|
|
/s/ Michael
Mathews
|
|
|
Michael
Mathews
|
|
|
Chief
Executive Officer
(Principal
Executive Officer)
|
|
|
|
August
11, 2009
|
|
/s/ David
Garrity
|
|
|
David
Garrity
|
|
|
Chief
Financial Officer
(Principal
Financial Officer)
|