Unassociated Document
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, 2010
|
|
|
|
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 001-34523
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.)
|
|
|
|
11
West 19th
Street, 10th
Floor, New York, NY
|
|
10011
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Registrant’s
telephone number: (646)
722-6260
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
Class
|
|
Outstanding
at August 9, 2010
|
Common
Stock, $0.001 par value per share
|
|
23,798,585
shares
|
TABLE
OF CONTENTS
|
Page
|
|
PART
I – FINANCIAL INFORMATION
|
F-1
|
|
|
|
|
Item
1.
|
Financial
Statements:
|
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets (unaudited)
|
F-2
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations (unaudited)
|
F-3
|
|
|
|
|
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity
(unaudited)
|
F-4
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited)
|
F-5
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
(unaudited)
|
F-7
|
|
|
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
21
|
|
|
|
|
|
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
30
|
|
|
|
|
|
Item
4.
|
Controls
and Procedures
|
30
|
|
|
|
|
|
PART
II – OTHER INFORMATION
|
31
|
|
|
|
|
Item
1.
|
Legal
Proceedings
|
31
|
|
|
|
|
|
Item
1A.
|
Risk
Factors
|
31
|
|
|
|
|
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
|
|
|
|
|
Item
3.
|
Defaults
Upon Senior Securities
|
31
|
|
|
|
|
|
Item
4.
|
(Removed
and Reserved)
|
31
|
|
|
|
|
|
Item
5.
|
Other
Information
|
31
|
|
|
|
|
|
Item
6.
|
Exhibits
|
31
|
|
|
|
|
|
SIGNATURES
|
33
|
|
Item
1.
|
Financial
Statements.
|
INTERCLICK,
INC. AND SUBSIDIARY
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS
|
|
|
Page
|
Financial
Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets – June 30, 2010 (unaudited) and December 31,
2009
|
|
F-2
|
|
|
|
Condensed
Consolidated Statements of Operations for the three and six months ended
June 30, 2010 and 2009 (unaudited)
|
|
F-3
|
|
|
|
Condensed
Consolidated Statement of Changes in Stockholders' Equity for the six
months ended June 30, 2010 (unaudited)
|
|
F-4
|
|
|
|
Condensed
Consolidated Statements of Cash Flows for the six months ended June 30,
2010 and 2009 (unaudited)
|
|
F-5
|
|
|
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
|
F-7
|
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
June
30, 2010
|
|
|
December
31, 2009
|
|
Assets
|
|
(Unaudited)
|
|
|
(See
Note 1)
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
9,922,770 |
|
|
$ |
12,653,958 |
|
Restricted
cash
|
|
|
997,390 |
|
|
|
- |
|
Accounts
receivable, net of allowance of $210,172 and $383,188,
respectively
|
|
|
21,806,995 |
|
|
|
21,631,305 |
|
Credit
facility reserve
|
|
|
556,889 |
|
|
|
1,052,167 |
|
Deferred
taxes, current portion
|
|
|
936,649 |
|
|
|
955,471 |
|
Income
tax receivable
|
|
|
497,798 |
|
|
|
- |
|
Prepaid
expenses and other current assets
|
|
|
321,781 |
|
|
|
367,183 |
|
Total
current assets
|
|
|
35,040,272 |
|
|
|
36,660,084 |
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
295,570 |
|
|
|
- |
|
Property
and equipment, net of accumulated depreciation of $917,644 and $597,288,
respectively
|
|
|
1,821,142 |
|
|
|
988,899 |
|
Intangible
assets, net of accumulated amortization of $988,350 and $909,350,
respectively
|
|
|
342,333 |
|
|
|
421,333 |
|
Goodwill
|
|
|
7,909,571 |
|
|
|
7,909,571 |
|
Investment
in available-for-sale marketable securities
|
|
|
225,394 |
|
|
|
715,608 |
|
Deferred
debt issue costs, net of accumulated amortization of $40,000 and $35,028,
respectively
|
|
|
- |
|
|
|
4,972 |
|
Deferred
taxes, net of current portion
|
|
|
2,695,009 |
|
|
|
2,579,568 |
|
Other
assets
|
|
|
207,573 |
|
|
|
192,179 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
48,536,864 |
|
|
$ |
49,472,214 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
10,492,210 |
|
|
$ |
10,934,236 |
|
Accrued
expenses (includes accrued compensation of $1,930,278 and $2,241,731,
respectively)
|
|
|
2,492,005 |
|
|
|
3,164,044 |
|
Credit
facility payable
|
|
|
2,784,443 |
|
|
|
5,260,834 |
|
Obligations
under capital leases, current portion
|
|
|
331,909 |
|
|
|
161,940 |
|
Deferred
rent, current portion (includes cease use liability of $108,338 at June
30, 2010)
|
|
|
118,546 |
|
|
|
3,508 |
|
Income
taxes payable
|
|
|
- |
|
|
|
515,306 |
|
Warrant
derivative liability
|
|
|
- |
|
|
|
69,258 |
|
Total
current liabilities
|
|
|
16,219,113 |
|
|
|
20,109,126 |
|
|
|
|
|
|
|
|
|
|
Obligations
under capital leases, net of current portion
|
|
|
595,886 |
|
|
|
338,562 |
|
Deferred
rent (includes cease use liability of $345,802 at June 30,
2010)
|
|
|
577,157 |
|
|
|
83,823 |
|
Total
liabilities
|
|
|
17,392,156 |
|
|
|
20,531,511 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies - See Note 8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
|
|
|
|
|
23,798,585
and 23,632,707 issued and outstanding, respectively
|
|
|
23,799 |
|
|
|
23,633 |
|
Additional
paid-in capital
|
|
|
44,327,775 |
|
|
|
42,229,293 |
|
Accumulated
other comprehensive loss
|
|
|
(20,427 |
) |
|
|
- |
|
Accumulated
deficit
|
|
|
(13,186,439 |
) |
|
|
(13,312,223 |
) |
Total
stockholders’ equity
|
|
|
31,144,708 |
|
|
|
28,940,703 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
48,536,864 |
|
|
$ |
49,472,214 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
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, 2010
|
|
|
June
30, 2009
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Revenues
|
|
$ |
21,659,883 |
|
|
$ |
10,648,686 |
|
|
$ |
35,861,740 |
|
|
$ |
19,071,977 |
|
Cost
of revenues
|
|
|
12,034,487 |
|
|
|
5,882,655 |
|
|
|
19,853,668 |
|
|
|
10,356,934 |
|
Gross
profit
|
|
|
9,625,396 |
|
|
|
4,766,031 |
|
|
|
16,008,072 |
|
|
|
8,715,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
3,873,745 |
|
|
|
2,895,717 |
|
|
|
7,104,273 |
|
|
|
4,573,382 |
|
Sales
and marketing
|
|
|
3,087,183 |
|
|
|
1,734,921 |
|
|
|
5,203,897 |
|
|
|
3,151,443 |
|
Technology
support
|
|
|
1,419,362 |
|
|
|
797,552 |
|
|
|
2,758,940 |
|
|
|
1,381,883 |
|
Amortization
of intangible assets
|
|
|
39,500 |
|
|
|
49,760 |
|
|
|
79,000 |
|
|
|
99,520 |
|
Total
operating expenses
|
|
|
8,419,790 |
|
|
|
5,477,950 |
|
|
|
15,146,110 |
|
|
|
9,206,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income (loss) from continuing operations
|
|
|
1,205,606 |
|
|
|
(711,919 |
) |
|
|
861,962 |
|
|
|
(491,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
8,151 |
|
|
|
- |
|
|
|
17,019 |
|
|
|
12 |
|
Warrant
derivative liability income (expense)
|
|
|
(272 |
) |
|
|
(159,294 |
) |
|
|
21,413 |
|
|
|
(232,061 |
) |
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
(36,349 |
) |
|
|
- |
|
|
|
(36,349 |
) |
Other
than temporary impairment of available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
(458,538 |
) |
|
|
- |
|
Interest
expense
|
|
|
(74,537 |
) |
|
|
(126,681 |
) |
|
|
(176,946 |
) |
|
|
(240,273 |
) |
Total
other expense
|
|
|
(66,658 |
) |
|
|
(322,324 |
) |
|
|
(597,052 |
) |
|
|
(508,671 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
1,138,948 |
|
|
|
(1,034,243 |
) |
|
|
264,910 |
|
|
|
(999,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(1,218,234 |
) |
|
|
- |
|
|
|
(139,126 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
(79,286 |
) |
|
|
(1,034,243 |
) |
|
|
125,784 |
|
|
|
(999,856 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on sale of discontinued operations, net of income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,220 |
) |
Loss
from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
(79,286 |
) |
|
|
(1,034,243 |
) |
|
|
125,784 |
|
|
|
(1,001,076 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on available-for-sale securities
|
|
|
(20,427 |
) |
|
|
(899,999 |
) |
|
|
(478,965 |
) |
|
|
(899,999 |
) |
Reclassification
adjustments for losses included in net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
36,349 |
|
|
|
- |
|
|
|
36,349 |
|
Other
than temporary impairment of available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
458,538 |
|
|
|
- |
|
Total
other comprehensive loss
|
|
|
(20,427 |
) |
|
|
(863,650 |
) |
|
|
(20,427 |
) |
|
|
(863,650 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$ |
(99,713 |
) |
|
$ |
(1,897,893 |
) |
|
$ |
105,357 |
|
|
$ |
(1,864,726 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
- |
|
|
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
Discontinued
operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income
|
|
$ |
- |
|
|
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
- |
|
|
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
Discontinued
operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income
|
|
$ |
- |
|
|
$ |
(0.05 |
) |
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares - basic
|
|
|
23,683,252 |
|
|
|
19,164,950 |
|
|
|
23,646,178 |
|
|
|
19,044,443 |
|
Weighted
average number of common shares - diluted
|
|
|
23,683,252 |
|
|
|
19,164,950 |
|
|
|
24,820,111 |
|
|
|
19,044,443 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE
SIX MONTHS ENDED JUNE 30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
Additional
|
|
|
Accumulated
Other
|
|
|
|
|
|
Total
|
|
|
|
Common
Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Equity
|
|
Balance,
January 1, 2010
|
|
|
23,632,707 |
|
|
$ |
23,633 |
|
|
$ |
42,229,293 |
|
|
$ |
- |
|
|
$ |
(13,312,223 |
) |
|
$ |
28,940,703 |
|
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
1,822,070 |
|
|
|
- |
|
|
|
- |
|
|
|
1,822,070 |
|
Issuances
of restricted shares
|
|
|
10,100 |
|
|
|
10 |
|
|
|
(10 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Issuance
of common shares for stock options and warrants exercised
|
|
|
155,778 |
|
|
|
156 |
|
|
|
228,576 |
|
|
|
- |
|
|
|
- |
|
|
|
228,732 |
|
Reclassification
of warrant derivative liability to equity upon expiration of price
protection
|
|
|
- |
|
|
|
- |
|
|
|
47,846 |
|
|
|
- |
|
|
|
- |
|
|
|
47,846 |
|
Unrealized
loss on available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(478,965 |
) |
|
|
- |
|
|
|
(478,965 |
) |
Other
than temporary impairment on available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
458,538 |
|
|
|
- |
|
|
|
458,538 |
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
125,784 |
|
|
|
125,784 |
|
Balance,
June 30, 2010
|
|
|
23,798,585 |
|
|
$ |
23,799 |
|
|
$ |
44,327,775 |
|
|
$ |
(20,427 |
) |
|
$ |
(13,186,439 |
) |
|
$ |
31,144,708 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENT
OF CASH FLOWS
(Unaudited)
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
125,784 |
|
|
$ |
(1,001,076 |
) |
Add
back loss from discontinued operations, net
|
|
|
- |
|
|
|
1,220 |
|
Income
(loss) from continuing operations
|
|
|
125,784 |
|
|
|
(999,856 |
) |
Adjustments
to reconcile net income (loss) from continuing
|
|
|
|
|
|
|
|
|
operations
to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
1,822,070 |
|
|
|
1,353,743 |
|
Other
than temporary impairment of available-for-sale securities
|
|
|
458,538 |
|
|
|
- |
|
Depreciation
of property and equipment
|
|
|
320,356 |
|
|
|
147,364 |
|
Amortization
of intangible assets
|
|
|
79,000 |
|
|
|
99,520 |
|
Amortization
of debt issue costs
|
|
|
4,972 |
|
|
|
21,583 |
|
Changes
in deferred tax assets
|
|
|
(594,417 |
) |
|
|
- |
|
Provision
for bad debts
|
|
|
(140,077 |
) |
|
|
(160,392 |
) |
Change
in warrant derivative liability
|
|
|
(21,413 |
) |
|
|
232,061 |
|
Loss
on available-for-sale securities
|
|
|
- |
|
|
|
36,349 |
|
Amortization
of debt discount
|
|
|
- |
|
|
|
500 |
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Increase
in accounts receivable
|
|
|
(35,613 |
) |
|
|
(2,968,432 |
) |
Decrease
(increase) in prepaid expenses and other current assets
|
|
|
45,402 |
|
|
|
(107,523 |
) |
Increase
in other assets
|
|
|
(15,394 |
) |
|
|
- |
|
(Decrease)
increase in accounts payable
|
|
|
(442,026 |
) |
|
|
1,083,434 |
|
(Decrease)
increase in accrued expenses
|
|
|
(672,039 |
) |
|
|
426,392 |
|
Increase
in deferred rent
|
|
|
525,302 |
|
|
|
11,257 |
|
Decrease
in income taxes payable
|
|
|
(515,306 |
) |
|
|
- |
|
Increase
in accrued interest
|
|
|
- |
|
|
|
1,346 |
|
Net
cash provided by (used in) operating activities
|
|
|
945,139 |
|
|
|
(822,654 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of available-for-sale securities
|
|
|
11,250 |
|
|
|
21,429 |
|
Increase
in restricted cash
|
|
|
(1,292,960 |
) |
|
|
- |
|
Purchases
of property and equipment
|
|
|
(573,929 |
) |
|
|
(73,883 |
) |
Net
cash used in investing activities
|
|
|
(1,855,639 |
) |
|
|
(52,454 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Procees
from common stock and warrants issued for cash
|
|
|
- |
|
|
|
2,257,000 |
|
Proceeds
from stock options and warrants exercised
|
|
|
228,732 |
|
|
|
- |
|
(Repayments
to) proceeds from credit facility, net
|
|
|
(1,981,113 |
) |
|
|
1,574,859 |
|
Principal
payments on notes payable
|
|
|
- |
|
|
|
(100,000 |
) |
Principal
payments on capital leases
|
|
|
(68,307 |
) |
|
|
(5,636 |
) |
Net
cash (used in) provided by financing activities
|
|
|
(1,820,688 |
) |
|
|
3,726,223 |
|
|
|
|
|
|
|
|
|
|
Cash
flows from discontinued operations:
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities-divestiture
|
|
|
- |
|
|
|
(250,000 |
) |
Net
cash used in discontinued operations
|
|
|
- |
|
|
|
(250,000 |
) |
|
|
|
|
|
|
|
|
|
Net
(decrease) increase in cash and cash equivalents
|
|
|
(2,731,188 |
) |
|
|
2,601,115 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
12,653,958 |
|
|
|
183,871 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$ |
9,922,770 |
|
|
$ |
2,784,986 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENT
OF CASH FLOWS
(Unaudited)
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
203,191 |
|
|
$ |
192,267 |
|
Income
taxes paid
|
|
$ |
1,219,583 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Property
and equipment acquired through capitalized leases
|
|
$ |
495,600 |
|
|
$ |
- |
|
Leasehold
improvements increased for deferred rent
|
|
$ |
83,070 |
|
|
$ |
- |
|
Reclassification
of warrant derivative liability to equity upon
|
|
|
|
|
|
|
|
|
expiration
of price protection
|
|
$ |
47,846 |
|
|
$ |
- |
|
Unrealized
loss on available-for-sale securities
|
|
$ |
20,427 |
|
|
$ |
863,650 |
|
Issuance
of common stock to eliminate or modify price protection for
warrants
|
|
$ |
- |
|
|
$ |
508,497 |
|
Issuance
of common stock for services to be rendered
|
|
$ |
- |
|
|
$ |
170,500 |
|
Issuance
of common stock to pay accrued interest payable
|
|
$ |
- |
|
|
$ |
13,266 |
|
Issuance
of common stock to extend debt maturity date
|
|
$ |
- |
|
|
$ |
12,000 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
Note 1. Nature of
Operations
Overview
interCLICK,
Inc. (the “Company”, or “interCLICK”) was formed in Delaware on March 4, 2002
under the name Outsiders Entertainment, Inc.
On August
28, 2007, the Company closed an Agreement and Plan of Merger and Reorganization
(the “CAN Merger Agreement”) and acquired Customer Acquisition Network, Inc.
(“CAN”), a privately-held corporation formed in Delaware on June 14,
2007. In connection with this acquisition, the Company changed
its name to Customer Acquisition Network Holdings, Inc. On June 25,
2008, the Company changed its name to interCLICK, Inc.
On August
31, 2007, the Company closed an Agreement and Plan of Merger (the “Desktop
Merger”), wherein the Company acquired Desktop Interactive, Inc. (“Desktop
Interactive”), a privately-held Delaware corporation engaged in the Internet
advertising business. Desktop Interactive merged with and into
Desktop Acquisition Sub, Inc. (“Desktop”), a wholly-owned subsidiary of the
Company. Desktop was the surviving corporation. Desktop
was formed in Delaware on August 24, 2007.
interCLICK
is an audience intelligence and targeting company, developing and executing
data-driven campaign strategies for major digital agencies and
marketers. Fueled by its proprietary software and sophisticated
approach to managing its supply chain, the Company empowers its clients to reach
desirable audiences efficiently, in brand-safe environments, and at tremendous
scale. Virtually all of the Company’s revenues are generated in the
United States.
On
January 4, 2008, the Company closed an Agreement and Plan of Merger (the
“Options Merger”), wherein the Company acquired Options Newsletter, Inc.
(“Options Newsletter”). Options Newsletter merged with and into
Options Acquisition Sub, Inc. (“Options Acquisition”), a wholly-owned subsidiary
of the Company. Options Acquisition was the surviving
corporation. On June 23, 2008, Options Acquisition was sold to
Options Media Group Holdings, Inc (“OPMG”).
Basis
of Presentation
The
interim condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the “SEC”). In
the opinion of the Company’s management, all adjustments (consisting of normal
recurring adjustments and reclassifications and non-recurring adjustments)
necessary to present fairly our results of operations for the three and six
months ended June 30, 2010 and 2009, our cash flows for the six months ended
June 30, 2010 and 2009 and our financial position as of June 30, 2010, have been
made. The results of operations for such interim periods are not
necessarily indicative of the operating results to be expected for the full
year.
Certain
information and disclosures normally included in the notes to the annual
consolidated financial statements have been condensed or omitted from these
interim consolidated financial statements. Accordingly, these interim
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2009, as filed
with the SEC on March 31, 2010. The December 31, 2009 balance sheet
is derived from those statements.
All
references to outstanding shares, options, warrants and per share information
have been adjusted to give effect to the one-for-two reverse stock split
effective October 23, 2009.
The
Company is particularly sensitive to seasonality given that the majority of its
revenues are tied to CPM (cost-per-thousand) campaigns, which are strongest in
the fourth quarter and weakest in the first quarter. While not necessarily
indicative of future seasonality, the Company’s revenue mix in 2009 was as
follows: 15.2% in the first quarter, 19.3% in the second quarter, 26.1% in the
third quarter, and 39.4% in the fourth quarter.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
Note
2. Significant Accounting Policies
Use
of Estimates
Our
unaudited condensed consolidated financial statements are prepared in accordance
with accounting principles generally accepted in the United States
(“GAAP”). These accounting principles require us to make certain
estimates, judgments and assumptions. We believe that the estimates,
judgments and assumptions upon which we rely are reasonable based upon
information available to us at the time that these estimates, judgments and
assumptions are made. These estimates, judgments and assumptions can
affect the reported amounts of assets and liabilities as of the date of our
unaudited condensed consolidated financial statements as well as the reported
amounts of revenues and expenses during the periods presented. Our
unaudited condensed consolidated financial statements would be affected to the
extent there are material differences between these estimates and actual
results. In many cases, the accounting treatment of a particular
transaction is specifically dictated by GAAP and does not require management’s
judgment in its application. There are also areas in which
management’s judgment in selecting any available alternative would not produce a
materially different result. Significant estimates include the
valuation of accounts receivable and allowance for doubtful accounts, estimates
of depreciable lives and valuation of property and equipment, valuation and
amortization periods of intangible assets and deferred costs, valuation of
goodwill, valuation of discounts on debt, valuation of derivatives, valuation of
investment in available-for-sale securities, valuation of shares of common
stock, options and warrants granted for services or recorded as debt discounts
or other non-cash purposes, the valuation allowance on deferred tax assets, and
estimates of the tax effects of the sale of a subsidiary.
Principles
of Consolidation
The
consolidated financial statements include the accounts of interCLICK, Inc. and
its wholly-owned subsidiary and Options Newsletter through its sale
date. All significant inter-company balances and transactions have
been eliminated in consolidation. As a result of the Options
Divestiture, the results of Options Newsletter are reported as “Discontinued
Operations”.
Restricted
Cash
Restricted
cash represents amounts pledged as security for certain agreements with
vendors. Upon satisfying the payment terms of the agreements, the
funds are expected to be released and available for use by the
Company.
In
January 2010, the Company pledged a $500,000, 3-month certificate of deposit, to
a third party in connection with a service agreement. In April 2010
and July 2010, the certificate of deposit and the pledge were renewed for an
additional three months.
In
February 2010, the Company acquired $495,600 of computer equipment under a
capitalized lease agreement. In connection with the lease agreement, the
Company’s banking institution issued an irrevocable 1-year standby letter of
credit for the benefit of the leasing company. The Company opened a
14-month certificate of deposit, bearing 0.56% interest, maturing April 1, 2011,
with its banking institution in the amount of $495,600 and pledged that to the
letter of credit. The Company shall consider the certificate of deposit
and accrued interest as restricted cash until such letter of credit
expires.
On March
11, 2010, the Company entered into a sub-lease agreement to relocate its New
York City headquarters to a larger space, having 16,840 square
feet. In connection with the lease agreement, the Company’s banking
institution issued an irrevocable 1-year standby letter of credit for the
benefit of the landlord. The Company opened a 14-month certificate of
deposit, bearing 0.70% interest, maturing March 27, 2011, with its banking
institution in the amount of $294,700 and pledged that to the letter of
credit. Through the lease term, the Company is required to maintain a
standby letter of credit for the benefit of the
landlord. Accordingly, as of June 30, 2010, the Company has
classified the certificate of deposit as restricted cash, a non-current
asset.
Property
and Equipment
Property
and equipment are stated at cost less accumulated
depreciation. Depreciation is provided for on a straight-line basis
over the estimated useful lives of the assets per the following
table. Leasehold improvements are amortized over the lesser of their
useful life or the lease term. Expenditures for additions and
improvements are capitalized while repairs and maintenance are expensed as
incurred.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
Category
|
|
Depreciation
Term
|
Computer
equipment
|
|
3-5
years
|
Software
|
|
3
years
|
Furnitur
eand fixtures
|
|
3-5
years
|
Office
equipment
|
|
3-5
years
|
Leasehold
improvements
|
|
5
years
|
Fair
Value Measurements
The
Company has adopted the provisions of ASC Topic 820, “Fair Value Measurements
and Disclosures”. ASC Topic 820 defines fair value as used in
numerous accounting pronouncements, establishes a framework for measuring fair
value and expands disclosure of fair value measurements. Excluded
from the scope of ASC Topic 820 are certain leasing transactions accounted for
under ASC Topic 840, “Leases.” The exclusion does not apply to fair
value measurements of assets and liabilities recorded as a result of a lease
transaction but measured pursuant to other pronouncements within the scope of
ASC Topic 820.
Reclassifications
Certain
amounts in the accompanying 2009 financial statements had been reclassified at
December 31, 2009. In particular, bad debt expense is now included in
general and administrative expenses. Merger, acquisition, and
divestiture costs are now included in general and administrative
expenses. Ad serving costs have been reclassified from general and
administrative costs to cost of revenues. Whereas certain
compensation costs (including stock-based compensation) had been included in
sales and marketing expenses, a portion of these costs have been reclassified to
either general and administrative expenses or technology support
expenses. Deferred revenue is now included in accrued
expenses. The following tables show the reclassifications to the
condensed consolidated statements of operations for the three and six months
ended June 30, 2009.
|
|
For
the Three Months Ended June 30, 2009
|
|
|
|
|
|
|
Reclassifications
|
|
|
|
|
|
|
As
Previously Reported
|
|
|
Bad
Debt
Expense
|
|
|
Merger,
Acquisition, and Divestiture Costs
|
|
|
Ad
Serving
Costs
|
|
|
Compensation
and
Employee- Related Costs
|
|
|
As
Reclassified
|
|
Revenues
|
|
$ |
10,648,686 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
10,648,686 |
|
Cost
of Revenue
|
|
|
5,624,005 |
|
|
|
|
|
|
|
|
$ |
258,650 |
|
|
|
|
|
|
5,882,655 |
|
Gross
profit
|
|
|
5,024,681 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,766,031 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
2,414,255 |
|
|
$ |
47,375 |
|
|
$ |
113,156 |
|
|
|
(258,650 |
) |
|
$ |
579,581 |
|
|
|
2,895,717 |
|
Sales
and marketing
|
|
|
2,691,096 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(956,175 |
) |
|
|
1,734,921 |
|
Technology
support
|
|
|
420,958 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
376,594 |
|
|
|
797,552 |
|
Merger,
acquisition and divestiture costs
|
|
|
113,156 |
|
|
|
|
|
|
|
(113,156 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
Amortization
of intangible assets
|
|
|
49,760 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
49,760 |
|
Baddebt
expense
|
|
|
47,375 |
|
|
|
(47,375 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Total
operating expenses
|
|
|
5,736,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,477,950 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss from continuing operations
|
|
$ |
(711,919 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(711,919 |
) |
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
|
|
For
the Six Months Ended June 30, 2009
|
|
|
|
|
|
|
Reclassifications
|
|
|
|
|
|
|
As
Previously Reported
|
|
|
Bad
Debt
Expense
|
|
|
Merger,
Acquisition, and Divestiture Costs
|
|
|
Ad
Serving
Costs
|
|
|
Compensation
and Employee-
Related
Costs
|
|
|
As
Reclassified
|
|
Revenues
|
|
$ |
19,071,977 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
19,071,977 |
|
Cost
of Revenue
|
|
|
10,064,603 |
|
|
|
|
|
|
|
|
$ |
292,331 |
|
|
|
|
|
|
10,356,934 |
|
Gross
profit
|
|
|
9,007,374 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,715,043 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
3,894,487 |
|
|
$ |
(160,392 |
) |
|
$ |
178,535 |
|
|
|
(292,331 |
) |
|
$ |
953,083 |
|
|
|
4,573,382 |
|
Sales
and marketing
|
|
|
4,733,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,581,959 |
) |
|
|
3,151,443 |
|
Technology
support
|
|
|
753,007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
628,876 |
|
|
|
1,381,883 |
|
Merger,
acquisition and divestiture costs
|
|
|
178,535 |
|
|
|
|
|
|
|
(178,535 |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
Amortization
of intangible assets
|
|
|
99,520 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,520 |
|
Baddebt
expense
|
|
|
(160,392 |
) |
|
|
160,392 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
Total
operating expenses
|
|
|
9,498,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,206,228 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss from continuing operations
|
|
$ |
(491,185 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(491,185 |
) |
Discontinued
Operations
On June
23, 2008, the Company completed the sale of its Options Acquisition subsidiary
pursuant to an Agreement of Merger and Plan of Reorganization. The amounts
associated with the sale of this subsidiary are reported as discontinued
operations in the accompanying consolidated financial statements, in accordance
with ASC Topic 820. In addition, certain allocable corporate expenses
pertaining to Options Acquisition are also included in discontinued
operations.
Accounting
for Derivatives
The
Company evaluates its options, warrants or other contracts to determine if those
contracts or embedded components of those contracts qualify as derivatives to be
separately accounted for under ASC Topic 815, “Derivatives and
Hedging”. The result of this accounting treatment is that the fair
value of the derivative is marked-to-market each balance sheet date and recorded
as a liability. In the event that the fair value is recorded as a
liability, the change in fair value is recorded in the statement of operations
as other income (expense). Upon conversion or exercise of a derivative
instrument, the instrument is marked to fair value at the conversion date and
then that fair value is reclassified to equity. Equity instruments
that are initially classified as equity that become subject to reclassification
under ASC Topic 815 are reclassified to liability at the fair value of the
instrument on the reclassification date.
Codification
Update
In
January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value
Measurements”. This update provides amendments to Topic 820 to
provide more robust disclosures about (1) the different classes of assets and
liabilities measured at fair value, (2) the valuation techniques and inputs
used, (3) the activity in Level 3 fair value measurements, and (4) the transfers
between Levels 1, 2, and 3. The adoption of ASU 2010-06 did not have
a material impact on the Company’s consolidated results of operations or
financial condition.
In
February 2010, the FASB issued ASU 2010-09, “Subsequent Events (Topic 855):
Amendments to Certain Recognition and Disclosure Requirements”. This
update addresses both the interaction of the requirements of Topic 855,
“Subsequent Events”, with the SEC’s reporting requirements and the intended
breadth of the reissuance disclosures provision related to subsequent events
(paragraph 855-10-50-4). The amendments in this update have the
potential to change reporting by both private and public entities, however, the
nature of the change may vary depending on facts and
circumstances. The adoption of ASU 2010-09 did not have a material
impact on the Company’s consolidated results of operations or financial
condition.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
In April
2010, the FASB issued ASU No. 2010-13, “Compensation – Stock
Compensation”. This update clarified the classification of an
employee share based payment award with an exercise price denominated in the
currency of a market in which the underlying security trades. This
update will be effective for the first fiscal quarter beginning after December
15, 2010, with early adoption permitted. The Company does not expect
the provisions of ASU 2010-13 to have a material effect on
the Company’s consolidated results of operations or financial
condition.
Note
3. Property and Equipment
Property
and equipment consisted of the following at June 30, 2010 and December 31,
2009:
|
|
June
30,
2010
|
|
|
December
31,
2009
|
|
Computerequipment
|
|
$ |
2,202,725 |
|
|
$ |
1,433,461 |
|
Furnitureandfixtures
|
|
|
195,596 |
|
|
|
72,711 |
|
Software
|
|
|
144,258 |
|
|
|
57,572 |
|
Leaseholdimprovements
|
|
|
173,764 |
|
|
|
- |
|
Officeequipment
|
|
|
22,443 |
|
|
|
22,443 |
|
|
|
|
2,738,786 |
|
|
|
1,586,187 |
|
Accumulateddepreciation
|
|
|
(917,644 |
) |
|
|
(597,288 |
) |
Propertyandequipment,
net
|
|
$ |
1,821,142 |
|
|
$ |
988,899 |
|
In
February 2010, the Company acquired $495,600 of computer equipment under a
capitalized lease agreement. Property and equipment held under
capitalized leases of $1,015,965 and $520,365 at June 30, 2010 and December 31,
2009, respectively, are included in computer equipment above.
Depreciation
expense for the six months ended June 30, 2010 and 2009 was $320,356 and
$147,364, of which $78,976 and $2,936, respectively, pertained to capitalized
leases. Accumulated depreciation amounted to $917,644 and $597,288,
of which $96,128 and $17,152 pertained to capitalized leases, as of June 30,
2010 and December 31, 2009, respectively.
Note
4. Intangible Assets
Intangible
assets, which were all acquired from the Desktop business combination, consisted
of the following at June 30, 2010 and December 31, 2009:
|
|
June
30,
2010
|
|
|
December
31,
2009
|
|
Customer
relationships
|
|
$ |
540,000 |
|
|
$ |
540,000 |
|
Developed
technology
|
|
|
790,000 |
|
|
|
790,000 |
|
Domain
name
|
|
|
683 |
|
|
|
683 |
|
|
|
|
1,330,683 |
|
|
|
1,330,683 |
|
Accumulated
amortization
|
|
|
(988,350 |
) |
|
|
(909,350 |
) |
Intangible
assets, net
|
|
$ |
342,333 |
|
|
$ |
421,333 |
|
Customer
relationships are fully amortized and were amortized based upon the estimated
percentage of annual or period projected cash flows generated by such
relationships, to the total cash flows generated over the estimated three-year
life of the customer relationships. Accordingly, this resulted in
accelerated amortization in which the majority of costs were amortized during
the two-year period following the acquisition date of the
intangible.
Developed
technology is being amortized on a straight-line basis over five
years.
The
domain name is fully amortized and was amortized over its remaining life of six
months following the acquisition date of the intangible.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
The
following is a schedule of estimated future amortization expense of intangible
assets as of June 30, 2010:
Year
Ending December 31,
|
|
|
|
2010
|
|
$ |
79,000 |
|
2011
|
|
|
158,000 |
|
2012
|
|
|
105,333 |
|
Total
|
|
$ |
342,333 |
|
Note
5. Investment in Available-For-Sale Marketable
Securities
The
following represents information about available-for sale securities held at
June 30, 2010:
Securities in
loss positions
|
|
Amortized
|
|
|
Aggregate
|
|
|
Aggregate
|
|
more
than 12 months
|
|
Cost
Basis
|
|
|
Unrealized
losses
|
|
|
Fair
Value
|
|
Options
Media Group Holdings, Inc. ("OPMG")
|
|
$ |
245,821 |
|
|
$ |
20,427 |
|
|
$ |
225,394 |
|
The
following represents information about available-for sale securities held at
December 31, 2009:
Securities in
loss positions
|
|
Amortized
|
|
|
Aggregate
|
|
|
Aggregate
|
|
more
than 12 months
|
|
Cost
Basis
|
|
|
Unrealized
losses
|
|
|
Fair
Value
|
|
Options
Media Group Holdings, Inc. ("OPMG")
|
|
$ |
715,608 |
|
|
$ |
- |
|
|
$ |
715,608 |
|
In May
2009, the Company sold 214,285 OPMG shares having a basis of $57,778 for
proceeds of $21,429 resulting in a loss of $36,349.
As of
December 31, 2009, the Company concluded that OPMG’s quoted market price was not
a reliable basis to use for fair valuation because OPMG was too thinly traded
and its stock price too volatile, and therefore did not reliably occur in an
active market. Furthermore, attempting to sell a significant number
of OPMG shares on the open market would not have been worthwhile because it
would require interCLICK to trade many small blocks and pay broker commissions
for each transaction. The Company therefore believed that a private
transaction was among the most economically feasible ways to sell any portion of
interCLICK’s investment in OPMG. Accordingly, the Company applied
Level 2 considerations to determine the market value using the best available
evidence. The Company concluded that recent principal-to-principal
(non-distressed) transactions – in November 2009 and January 2010 at $0.10 per
share – were appropriate valuation inputs to determine fair value of OPMG shares
as of December 31, 2009.
In
January 2010, the Company sold 112,500 OPMG shares having a basis of $11,250 for
proceeds of $11,250 resulting in no gain or loss.
As of
March 31, 2010, the Company determined that its investment in OPMG shares was
other than temporarily impaired to $0.0349 per share (from a basis of $0.10 per
share) and recognized an other than temporary impairment of
$458,538. This was based primarily on the extent and length of time
over which the investment had been in a continuous loss position and the
Company’s belief that it is unlikely OPMG’s stock price will increase
significantly in the foreseeable future. Furthermore, the Company has
not conducted any private sale transactions and has not received any offers to
buy shares at any price. The Company may also attempt to sell some
shares in the open market in the near future.
During
the first six months of 2010 and to date, OPMG has traded in an active
market. Sufficient trading volume, the lack of principal-to-principal
transactions to support a value higher than current market price, and the
near-term potential of the Company selling OPMG shares in the open market
support the use of a Level 1 input (market price) for the basis of fair value as
of June 30, 2010. On such date, OPMG’s closing market price was
$0.032 per share.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
As of
June 30, 2010, the Company determined that its investment in OPMG was
temporarily impaired due to the relatively short amount of time OPMG has traded
under $.0349. Thus, the Company valued its investment at $225,394 as
of June 30, 2010, and an unrealized loss of $20,427 has been recognized in other
comprehensive loss for the three and six months ended June 30,
2010.
Note
6. Credit Facility Agreement and Capital Lease Obligations
Credit
Facility Agreement
On
November 13, 2008, the Company entered into a revolving credit facility, in the
form of an Accounts Receivable Financing Agreement (the “Agreement”), with
Crestmark Commercial Capital Lending, LLC (“Crestmark”) to finance
certain eligible accounts receivable of the Company, as defined in the
Agreement, up to a maximum credit line of $3.5 million (subsequently increased
to $4.5 million on February 3, 2009, $5.5 million on April 30, 2009, and to $7.0
million on September 2, 2009), which would represent gross financed accounts
receivable less a 20% reserve holdback by Crestmark. The Crestmark
credit facility has an interest rate equal to prime plus 1.0% (overall interest
rate of 4.25% at June 30, 2010) and is secured by all of the Company’s assets
except property and equipment financed elsewhere and the Company’s investment in
OPMG shares. In addition, the Company pays a monthly fee (initially
0.575% and decreased to 0.375% on September 2, 2009) per 30 days on each
financed invoice amount until the invoice is paid. The Crestmark
credit facility was for an initial term of six months expiring May 12, 2009
(extended on March 3, 2009 for one year to May 12, 2010) and effective May 12,
2010, either the Company or Crestmark may terminate the Agreement with 60 days
prior written notice to the other party without being subject to any early
termination fee. On July 12, 2010, the Company provided Crestmark
with notification of termination of the Agreement effective September 10,
2010. The Company is in advanced discussions with another lender
about establishing a replacement line of credit which would likely be secured by
most of the Company’s assets.
The
balance due on the credit facility at June 30, 2010 was $2,227,554, which is net
of the 20% reserve of $556,889 that is presented as Credit facility reserve, a
current asset. The unused amount under the credit facility available
to the Company at June 30, 2010 was $4,772,446. The average monthly
net balance due under the credit facility was $1,813,231 and $3,502,410 for the
six months ended June 30, 2010 and 2009, respectively.
The
following is a summary of accounts receivable financed as well as credit
facility fees incurred for the three and six months ended June 30, 2010 and
2009:
|
|
For
the Three
|
|
|
For
the Three
|
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Accounts
receivable financed
|
|
$ |
3,403,055 |
|
|
$ |
9,134,370 |
|
|
$ |
6,430,031 |
|
|
$ |
15,708,010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
facility fees incurred
|
|
$ |
56,639 |
|
|
$ |
150,625 |
|
|
$ |
151,134 |
|
|
$ |
247,487 |
|
Capital
Lease Obligations
In
February 2010, the Company purchased computer equipment for $495,600 through a
capital lease agreement, bearing interest of 8.35%, payable in 12 quarterly
installments of $47,119.
Capital
lease obligations consisted of the following at June 30, 2010 and December 31,
2009:
|
|
June
30, 2010
|
|
|
December
31, 2009
|
|
Capital
lease obligations
|
|
$ |
927,795 |
|
|
$ |
500,502 |
|
Less:
Current maturities
|
|
|
(331,909 |
) |
|
|
(161,940 |
) |
Amount
due after one year
|
|
$ |
595,886 |
|
|
$ |
338,562 |
|
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
Note
7. Fair Value of Financial Instruments
The
estimated fair value of certain financial instruments, including cash and cash
equivalents, restricted cash, accounts receivable, accounts payable and accrued
expenses are carried at historical cost basis, which approximates their fair
values because of the short-term nature of these instruments.
The
accounting standard for fair value measurements provides a framework for
measuring fair value and requires expanded disclosures regarding fair value
measurements. Fair value is defined as the price that would be
received for an asset or the exit price that would be paid to transfer a
liability in the principal or most advantageous market in an orderly transaction
between market participants on the measurement date. The accounting
standard established a fair value hierarchy which requires an entity to maximize
the use of observable inputs, where available. This hierarchy
prioritizes the inputs into three broad levels as follows. Level 1
inputs are quoted prices (unadjusted) in active markets for identical
assets or liabilities. Level 2 inputs are quoted prices for similar
assets and liabilities in active markets or inputs that are observable for the
asset or liability, either directly or indirectly through market corroboration,
for substantially the full term of the financial instrument. Level 3
inputs are unobservable inputs based on the Company’s own assumptions used to
measure assets and liabilities at fair value. A financial asset or
liability’s classification within the hierarchy is determined based on the
lowest level input that is significant to the fair value
measurement.
We
classify assets and liabilities measured at fair value in their entirety based
on the lowest level of input that is significant to their fair value
measurement. Assets and liabilities measured at fair value on a
recurring basis consisted of the following at June 30, 2010:
|
|
Total
Carrying
|
|
|
Fair
Value Measurements at
|
|
|
Total
Carrying
|
|
|
Fair
Value Measurements at
|
|
|
|
Value
at
|
|
|
June
30, 2010
|
|
|
Value
at
|
|
|
December
31, 2009
|
|
|
|
June
30, 2010
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
|
December
31,
2009
|
|
|
(Level
1)
|
|
|
(Level
2)
|
|
|
(Level
3)
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in available-for-sale
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
marketable
securities
|
|
$ |
225,394 |
|
|
$ |
225,394 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
715,608 |
|
|
$ |
- |
|
|
$ |
715,608 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrant
derivative liability
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
69,258 |
|
|
$ |
- |
|
|
$ |
69,258 |
|
|
$ |
- |
|
Unrealized
gains (losses) recognized on the investment in available-for-sale marketable
securities are included in other comprehensive income (loss) in the accompanying
condensed consolidated statements of operations (See Note 5 for valuation
methodology). Realized gains (losses) recognized on the investment in
available-for-sale marketable securities are included in other income (expense)
in the accompanying condensed consolidated statements of
operations. Income (expense) recognized on the warrant derivative
liability are included in other income (expense) in the accompanying condensed
consolidated statements of operations.
The
valuation technique of the investment in available-for-sale marketable
securities changed during the three months ended March 31, 2010. At
March 31, 2010, the Company began utilizing the closing share price of OPMG’s
stock (Level 1) in order to value the Company’s remaining investment in OPMG
shares. Previously, the Company had been utilizing recent sales
prices in private transactions (Level 2) to value its investment in OPMG shares
as management believed OPMG’s quoted market price was not a reliable basis to
use for fair valuation based on the conclusion that OPMG was too thinly traded
and therefore did not reliably occur in an active market.
Note
8. Commitments and Contingencies
Operating
Leases
In
January 2010, the Company entered into a 16-month agreement for its Chicago
office space with monthly rent of $2,151 commencing February 1, 2010 with 3.0%
escalation effective June 1, 2010.
In
February 2010, the lease amendment for the Company’s office space located in
Boca Raton, Florida became effective upon completion of the improvements to the
expansion premises. Accordingly, the Company moved into the expansion
premises and agreed to (i) lease additional space for a period of 60 months, and
(ii) extend the lease term of the original space to terminate the same time as
the expanded space. Upon the expansion premises commencement date,
the original premises monthly rent was adjusted to $2,840 with 3.0% annual
escalation and the expansion premises monthly rent was $6,923 with 3.0% annual
escalation. The landlord provided an allowance of $83,070 for the
improvements to the expansion premises as well as an abatement of rent for the
first 14 months of the lease on the expansion premises. The leasehold
improvements were recognized with an $83,070 increase in property and equipment
and a corresponding increase in deferred rent, both of which shall be amortized
over the lease term.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
On
February 22, 2010, the Company entered into a 5-year agreement, commencing June
1, 2010, for office space in Santa Monica, California bearing monthly rent of
$3,827 with an annual 3.0% escalation.
On March
11, 2010, the Company entered into a sub-lease agreement to relocate its New
York City headquarters to a larger space, having 16,840 square
feet. The new lease is for a term of 92 months commencing on May 1,
2010, bearing monthly rent of $49,117 with an annual 2.5%
escalation. In connection with the lease agreement, the Company’s
banking institution issued an irrevocable 1-year standby letter of credit for
the benefit of the landlord. The Company opened a certificate of deposit
with its banking institution in the amount of $294,700 and pledged that to the
letter of credit. Through the lease term, the Company is required to
maintain a standby letter of credit for the benefit of the landlord.
Accordingly, as of June 30, 2010, the Company has classified the certificate of
deposit as restricted cash, a non-current asset.
The
Company entered into an agreement to sublease the office space of its former New
York City headquarters commencing May 1, 2010 for the remainder of the original
lease term with monthly rent of $16,717 with an annual 2.5%
escalation. Accordingly, the Company recognized an early cease use
liability of $497,851 pertaining to the prior New York office
space. The charge to operations for the establishment of the
liability was offset by $66,350 due to the elimination of deferred rent related
to the former office space. The balance of the early cease use
liability was $454,140 at June 30, 2010, of which $345,802 is
long-term.
Minimum
Fees
The
Company is party to multi-year agreements with third parties whereby the Company
is obligated to incur minimum fees of $2,154,250 in 2010 and $1,568,000 in
2011. Under the agreements, the Company has expensed $873,947 in fees
during the six months ended June 30, 2010.
Legal
Matters
From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business. As of June 30, 2010, there were no
pending or threatened lawsuits that could reasonably be expected to have a
material effect on the results of our operations.
There are
no proceedings in which any of our directors, officers or affiliates, or any
registered or beneficial shareholder, is an adverse party or has a material
interest adverse to our interest.
Note
9. Stockholders’ Equity
Preferred
Stock
The
Company is authorized to issue up to 10,000,000 shares of preferred stock having
a par value of $0.001 per share, of which none was issued and outstanding at
June 30, 2010 and December 31, 2009.
Common
Stock
The
Company is authorized to issue up to 140,000,000 shares of common stock having a
par value of $0.001 per share, of which 23,798,585 and 23,632,707 shares were
issued and outstanding at June 30, 2010 and December 31, 2009,
respectively.
During
the six months ended June 30, 2010, proceeds of $228,732 were received and an
aggregate of 155,778 shares were issued as a result of stock option and warrant
exercises.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
Stock
Warrants
A summary
of the Company’s warrant activity during the six months ended June 30, 2010 is
presented below:
Warrants
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic Value
|
|
Balance
Outstanding, December 31, 2009
|
|
|
1,286,809 |
|
|
$ |
3.51 |
|
|
|
|
|
|
|
Granted
|
|
|
25,000 |
|
|
$ |
4.44 |
|
|
|
|
|
|
|
Exercised
|
|
|
(213,750 |
) |
|
$ |
2.80 |
|
|
|
|
|
|
|
Forfeited
|
|
|
(60,000 |
) |
|
$ |
4.24 |
|
|
|
|
|
|
|
Expired
|
|
|
(5,000 |
) |
|
$ |
11.14 |
|
|
|
|
|
|
|
Balance
Outstanding, June 30, 2010
|
|
|
1,033,059 |
|
|
$ |
3.60 |
|
|
|
2.4 |
|
|
$ |
459,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
June 30, 2010
|
|
|
1,014,309 |
|
|
$ |
3.58 |
|
|
|
2.4 |
|
|
$ |
459,224 |
|
During
2010, 15,494 of the Company’s warrants contained round-down protection (price
protection), which caused the warrants to be treated as derivatives (see Note
7). In May 2010, price protection expired requiring $47,846 of the
warrant derivative liability to be reclassified to additional paid-in
capital. Accordingly, the fair value of the warrant derivative
liability was $0 as of June 30, 2010 as shown in the accompanying condensed
consolidated balance sheet. The change in fair value (taking into
consideration the cumulative effect of the change in accounting principle
adopted on January 1, 2009) of the warrant derivative liability of $21,413 and
($232,061) during the six months ended June 30, 2010 and 2009, respectively, has
been recorded in the accompanying condensed consolidated statements of
operations as warrant derivative liability income (expense).
Stock
Incentive Plan and Stock Option Grants to Employees and Directors
In 2007,
the Company adopted the 2007 Stock Incentive Plan (the “Plan”) and the 2007
Incentive Stock and Award Plan (the “2007 Award Plan”) that provide for the
grant of shares of common stock and/or options to purchase shares of common
stock to directors, employees and consultants. On June 11, 2010, the
Company increased the number of shares of common stock eligible for grant under
the 2007 Award Plan from 3,112,500 to 4,512,500 shares.
During
the six months ended June 30, 2010, the Company granted 529,000 stock options,
all of which were under the 2007 Award Plan, at various exercise prices ranging
from $3.68 to $5.46 per share. The options vest pro rata over three
to four years; all options expire five years from the grant date.
The
total fair value of stock options granted to employees during the six
months ended June 30, 2010 was $1,634,023, which is being recognized over the
respective vesting periods. During the six months ended June 30, 2010
and 2009, the Company recorded compensation expense of $1,659,872 and
$1,334,630, respectively, in connection with employee stock
options.
As of
June 30, 2010, 1,437,983 shares were remaining under the 2007 Award Plan for
future issuance.
The
Company estimates the fair value of share-based compensation utilizing the
Black-Scholes option pricing model, which is dependent upon several variables
such as the expected option term, expected volatility of our stock price over
the expected term, expected risk-free interest rate over the expected option
term, expected dividend yield rate over the expected option term, and an
estimate of expected forfeiture rates. The Company believes this
valuation methodology is appropriate for estimating the fair value of stock
options granted to employees and directors which are subject to ASC Topic 718
requirements. These amounts are estimates and thus may not be
reflective of actual future results, nor amounts ultimately realized by
recipients of these grants. The Company recognizes compensation on a
straight-line basis over the requisite service period for each
award. The following table summarizes the assumptions the Company
utilized to record compensation expense for stock options granted during the six
months ended June 30, 2010 and 2009:
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Assumptions
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Expected
life (years)
|
|
|
3.5
- 3.75 |
|
|
|
5.0 |
|
Expected
volatility
|
|
|
102.6%
- 110.1 |
% |
|
|
117.2%
- 121.4 |
% |
Weighted-average
volatility
|
|
|
107.4 |
% |
|
|
120.5 |
% |
Risk-free
interest rate
|
|
|
2.02%
- 2.69 |
% |
|
|
1.89%
- 2.86 |
% |
Dividend
yield
|
|
|
0.00 |
% |
|
|
0.00 |
% |
Expected
forfeiture rate
|
|
|
8.7 |
% |
|
|
2.8 |
% |
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
For stock options issued through September 30, 2009,
the expected life is based on the contractual term. Thereafter, the
Company utilized the simplified method to estimate the expected life for stock
options granted to employees. The simplified method was used as the
Company does not have sufficient historical data regarding stock option
exercises. The expected volatility is based on historical
volatility. The risk-free interest rate is based on the U.S. Treasury
yields with terms equivalent to the expected life of the related option at the
time of the grant. Dividend yield is based on historical
trends. While the Company believes these estimates are reasonable,
the compensation expense recorded would increase if the expected life was
increased, a higher expected volatility was used, or if the expected dividend
yield increased.
A summary
of the Company’s stock option activity for employees and directors during the
six months ended June 30, 2010 is presented below:
Options
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contractual Term
|
|
|
Aggregate
Intrinsic Value
|
|
Balance
Outstanding, December 31, 2009
|
|
|
4,994,167 |
|
|
$ |
2.69 |
|
|
|
|
|
|
|
Granted
|
|
|
529,000 |
|
|
$ |
4.42 |
|
|
|
|
|
|
|
Exercised
|
|
|
(43,333 |
) |
|
$ |
2.05 |
|
|
|
|
|
|
|
Forfeited
|
|
|
(234,375 |
) |
|
$ |
3.24 |
|
|
|
|
|
|
|
Expired
|
|
|
- |
|
|
$ |
- |
|
|
|
|
|
|
|
Balance
Outstanding, June 30, 2010
|
|
|
5,245,459 |
|
|
$ |
2.85 |
|
|
|
3.5 |
|
|
$ |
5,411,505 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
to vest, June 30, 2010
|
|
|
5,081,854 |
|
|
$ |
2.82 |
|
|
|
3.4 |
|
|
$ |
5,333,440 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
June 30, 2010
|
|
|
2,202,220 |
|
|
$ |
2.18 |
|
|
|
2.8 |
|
|
$ |
3,306,200 |
|
The
weighted-average grant-date fair value of options granted to employees during
the six months ended June 30, 2010 and 2009 was $3.09 and $1.98,
respectively. The total intrinsic value of options exercised by
employees during the six months ended June 30, 2010 and 2009 was $136,749 and
$0, respectively.
Nonvested
Common Stock Grants to Employees
On
January 25, 2010, the Company granted an aggregate of 7,600 restricted shares of
common stock having a fair value of $39,596 (based on a quoted trading price of
$5.21 per share) to employees. The shares were issued under the 2007
Award Plan and vest annually over a two-year period, subject to continued
employment by the Company.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
During
the six months ended June 30, 2010 and 2009, the Company recognized an aggregate
amount of $58,327 and $4,931 of stock-based compensation for nonvested shares of
common stock issued to employees.
Nonvested
Shares
|
|
Number
of
Shares
|
|
|
Weighted Average
Grant
Date
Fair
Value
|
|
Nonvested
at December 31, 2009
|
|
|
73,594 |
|
|
$ |
4.21 |
|
Granted
|
|
|
7,600 |
|
|
$ |
5.21 |
|
Vested
|
|
|
(13,516 |
) |
|
$ |
3.29 |
|
Forfeited
|
|
|
- |
|
|
$ |
- |
|
Nonvested
at June 30, 2010
|
|
|
67,678 |
|
|
$ |
4.51 |
|
The total
fair value of shares vested to employees during the six months ended June 30,
2010 was $56,420.
As of
June 30, 2010, there was $7,056,996 of total unrecognized compensation costs
related to nonvested share-based compensation arrangements. That cost
is expected to be recognized over a weighted-average period of 1.3
years.
Other
Stock-Based Awards to Nonemployees
On April
15, 2010, as part of a one-year consulting agreement, the Company granted
warrants to purchase an aggregate of 25,000 shares of common stock having a fair
value of $72,000 to a consultant for services to be rendered. The
warrants have an exercise price of $4.44 per share, were not part of the 2007
Award Plan, vest in equal increments quarterly over a one-year period commencing
June 30, 2010, and expire three years from the grant date. As these
warrants were issued to nonemployees, the fair value was recalculated at June
30, 2010 at $52,750 and, accordingly, $22,945 was recognized as stock-based
compensation during the three months ended June 30, 2010. The
warrants shall be revalued and expensed in a similar manner in each subsequent
reporting period during the consultant’s one-year service term.
During
the six months ended June 30, 2010 and 2009, the Company recognized an aggregate
amount of $103,871 and $14,182 of stock-based compensation for stock options,
stock warrants and common shares issued to nonemployees.
Note
10. Net Earnings (Loss) per Share
Basic
earnings (loss) per share are computed using the weighted average number of
shares of common stock outstanding during the period. Diluted
earnings (loss) per share are computed using the weighted average number of
common shares and potentially dilutive securities outstanding during the
period. Potentially dilutive securities consist of the incremental
shares of common stock issuable upon exercise of stock options and warrants
(using the treasury stock method) as well as nonvested shares of common stock
and convertible debt. The options, warrants and nonvested shares are
considered to be common stock equivalents and are only included in the
calculation of diluted earnings per common share when their effect is
dilutive. Potentially dilutive securities are excluded from the
computation if their effect is anti-dilutive.
Components
of basic and diluted earnings per share for the six months ended June 30, 2010
was as follows:
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
|
|
For
the Six Months Ended June 30, 2010
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Net
income
|
|
$ |
125,784 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$ |
125,784 |
|
|
|
23,646,178 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
- |
|
|
|
919,708 |
|
|
|
|
|
Stock
warrants
|
|
|
- |
|
|
|
241,817 |
|
|
|
|
|
Nonvested
shares
|
|
|
- |
|
|
|
12,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
+
assumed conversions
|
|
$ |
125,784 |
|
|
|
24,820,111 |
|
|
$ |
0.01 |
|
Options
to purchase 5,395,459 and 1,781,500 shares of common stock and warrants to
purchase 1,033,059 and 198,750 shares of common stock were outstanding during
the three and six months ended June 30, 2010, respectively, but were not
included in the computation of diluted earnings per share because the effects
would have been anti-dilutive. In addition, 67,678 nonvested shares
were not included in the computation of diluted earnings per share for the three
months ended June 30, 2010, because the number of shares assumed purchased
(calculated using the compensation cost attributed to future services and not
yet recognized) under the treasury stock method exceeds the number of shares
that would be issued.
Options
to purchase 4,053,750 common shares, warrants to purchase 1,126,025 common
shares, 24,610 nonvested common shares and $100,000 of convertible debt were
outstanding during the three and six months ended June 30, 2009, but were not
included in the computation of diluted loss per share because the effects would
have been anti-dilutive. The options and warrants are considered to
be common stock equivalents and are only included in the calculation of diluted
earnings per common share when their effect is dilutive.
Note
11. Income Taxes
The
Company files a consolidated U.S. income tax return that includes its U.S.
subsidiary. The Company also files state income tax returns in California,
Florida, Illinois, New York and Texas. The Company has recorded an income
tax provision for the six months ended June 30, 2010 of $139,126. The tax
provision is based on the Company's estimate of the effective tax rate expected
to be applicable for the full year. The effective tax rate of 52.5% for
the six months ended June 30, 2010 differs from the statutory rate principally
because of state income taxes, a valuation allowance established on capital loss
carryforwards and other non deductible expenses. The effective rate is
based on the Company's best estimate of projected income through the end of the
year, in which the first quarter is typically seasonally weakest and the fourth
quarter is expected to be seasonally strongest (see Note 1).
Note
12. Concentrations
Concentration
of Credit Risk
Financial
instruments that potentially subject the Company to concentration of credit risk
consist of cash and cash equivalents and accounts receivable. Cash
and cash equivalents are deposited in the local currency in various financial
institutions in the United States. The balance, at any given time,
may exceed Federal Deposit Insurance Corporation insurance limits. As
of June 30, 2010 and December 31, 2009, there was approximately $11,175,000
and $13,336,000, respectively, in excess of insurable limits.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE
30, 2010
(Unaudited)
Concentration
of Revenues, Accounts Receivable and Publisher Expense
For the
three and six months ended June 30, 2010 and 2009, 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, 2010
|
|
|
June
30, 2009
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Customer
|
|
|
10.9 |
% |
|
|
0.0 |
% |
|
|
11.1 |
% |
|
|
0.0 |
% |
Customer
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
11.3 |
% |
|
|
0.0 |
% |
Customer
|
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
12.3 |
% |
Totals
|
|
|
10.9 |
% |
|
|
0.0 |
% |
|
|
22.4 |
% |
|
|
12.3 |
% |
At June
30, 2010 and December 31, 2009, concentration of accounts receivable with
significant customers representing 10% or greater of accounts receivable was as
follows:
|
|
June
30,
2010
|
|
|
December
31,
2009
|
|
Customer
|
|
|
11.5 |
% |
|
|
17.9 |
% |
Customer
|
|
|
10.5 |
% |
|
|
0.0 |
% |
Totals
|
|
|
22.0 |
% |
|
|
17.9 |
% |
For the
three and six months ended June 30, 2010 and 2009, the Company made significant
purchases of advertising impressions from publishers with individual percentage
of total publisher expense (included in cost of 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, 2010
|
|
|
June
30, 2009
|
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Publisher
|
|
|
33.9 |
% |
|
|
22.5 |
% |
|
|
30.5 |
% |
|
|
19.0 |
% |
Totals
|
|
|
33.9 |
% |
|
|
22.5 |
% |
|
|
30.5 |
% |
|
|
19.0 |
% |
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 condensed consolidated financial statements and related notes
appearing elsewhere in this report. 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 Form 10-K for the year ended December 31, 2009.
This
following discussion and analysis includes both financial measures in accordance
with GAAP, as well as a non-GAAP financial measure, EBITDA. EBITDA represents
operating income or loss before interest, taxes, depreciation and
amortization, including stock-based compensation. EBITDA should be
viewed as supplemental to, and not as an alternative for, net income or loss,
income or loss from operations or any other measure for determining operating
performance or liquidity, as determined under GAAP. We have included a
reconciliation of our non-GAAP financial measure to net income. See
pages 24 and 27 of this report.
EBITDA is
used by our management as an additional measure of our performance for purposes
of business decision-making, including developing budgets and managing
expenditures. Period-to-period comparisons of EBITDA helps our management
identify additional trends in our financial results that may not be shown solely
by period-to-period comparisons of income or loss, or income or loss from
operations. Our management recognizes that EBITDA has inherent limitations
because of the excluded items, particularly those items that are recurring in
nature.
We
believe that the presentation of EBITDA is useful to investors in their analysis
of our results for reasons similar to the reasons why our management finds it
useful and because it helps facilitate investor understanding of decisions made
by our management in light of the performance metrics used in making those
decisions. In addition, we believe that providing EBITDA, together with a
reconciliation to GAAP, helps investors make comparisons between interCLICK and
other companies. In making any comparisons to other companies, investors need to
be aware that companies use different non-GAAP measures to evaluate their
financial performance. Investors should pay close attention to the specific
definition being used and to the reconciliation between such measure and the
corresponding GAAP measure provided by each company under applicable SEC
rules.
Company
Overview
interCLICK,
Inc. (the “Company” or “interCLICK”) is an audience intelligence and targeting
company, developing and executing data-driven campaign strategies for major
digital agencies and marketers. Fueled by its proprietary Open
Segment Manager (OSM) platform and sophisticated approach to managing its supply
chain, the Company empowers its clients to reach desirable audiences
efficiently, in brand-safe environments, and at tremendous scale.
We
generate our revenue through the sale of online display advertising which is
placed on third-party publisher websites. Virtually all of the
Company’s revenues are generated in the United States.
interCLICK
is particularly sensitive to seasonality given that the majority of its revenues
are tied to CPM (cost-per-thousand) campaigns, which are strongest in the fourth
quarter and weakest in the first quarter.
Significant
events which affected our results of operations include:
|
·
|
Revenues
for the three months ended June 30, 2010 increased 103% to $21,659,883
from $10,648,686 for the prior year comparable period; revenues for the
six months ended June 30, 2010 increased 88% to $35,861,740 from
$19,071,977 for the prior year comparable period;
|
|
|
|
|
·
|
Gross
profit margin for the three months ended June 30, 2010 was 44.4% as
compared to 44.8% in the prior year comparable period; gross profit margin
for the six months ended June 30, 2010 was 44.6% as compared to 45.7% in
the prior year comparable period;
|
|
|
|
|
·
|
Headcount
increased to 96 people at June 30, 2010, from 64 people at the end of the
prior year comparable period;
|
|
|
|
|
·
|
EBITDA
for the three months ended June 30, 2010 increased to $2,394,988 compared
to $189,992 in the prior year comparable period; EBITDA for the six months
ended June 30, 2010 increased to $3,083,388 compared to $1,109,442 in the
prior year comparable period;
|
|
|
|
|
·
|
We
have achieved positive EBITDA for seven straight quarters beginning with
the fourth quarter of 2008;
|
|
|
|
|
·
|
Net
loss for the three months ended June 30, 2010 was ($79,286), or $0.00 per
share, compared to ($1,034,243), or ($0.05) per share, in the prior year
comparable period; and net income for the six months ended June 30, 2010
was $125,784, or $0.01 per share, compared to a net loss of ($1,001,076),
or ($0.05) per share, in the prior year comparable
period. Results for the three months ended June 30, 2010
included an income tax expense of $1,218,234; results for the six months
ended June 30, 2010 included an other than temporary impairment of
available-for-sale-securities of
$458,538.
|
Results
of Operations
Three
Months Ended June 30, 2010 Compared with Three Months Ended June 30,
2009
The following table presents our
results of operations for the three months ended June 30, 2010 and 2009. The
following discussion of our costs reflects the reclassification of our expense
categories we implemented in the third quarter of 2009; all prior periods have
been retroactively adjusted.
|
|
For
the Three
|
|
|
For
the Three
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Unaudited
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Revenues
|
|
$ |
21,659,883 |
|
|
$ |
10,648,686 |
|
Cost
of revenues
|
|
|
12,034,487 |
|
|
|
5,882,655 |
|
Gross
profit
|
|
|
9,625,396 |
|
|
|
4,766,031 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
3,873,745 |
|
|
|
2,895,717 |
|
Sales
and marketing
|
|
|
3,087,183 |
|
|
|
1,734,921 |
|
Technology
support
|
|
|
1,419,362 |
|
|
|
797,552 |
|
Amortization
of intangible assets
|
|
|
39,500 |
|
|
|
49,760 |
|
Total
operating expenses
|
|
|
8,419,790 |
|
|
|
5,477,950 |
|
Operating
income (loss)
|
|
|
1,205,606 |
|
|
|
(711,919 |
) |
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
8,151 |
|
|
|
- |
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
(36,349 |
) |
Warrant
derivative liability expense
|
|
|
(272 |
) |
|
|
(159,294 |
) |
Interest
expense
|
|
|
(74,537 |
) |
|
|
(126,681 |
) |
Total
other expense
|
|
|
(66,658 |
) |
|
|
(322,324 |
) |
Income
(loss) before income taxes
|
|
|
1,138,948 |
|
|
|
(1,034,243 |
) |
Income
tax expense
|
|
|
(1,218,234 |
) |
|
|
- |
|
Net
loss
|
|
|
(79,286 |
) |
|
|
(1,034,243 |
) |
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
Unrealized
losses on securities:
|
|
|
|
|
|
|
|
|
Unrealized
loss on available-for-sale-securities
|
|
|
(20,427 |
) |
|
|
(899,999 |
) |
Reclassification
adjustments for losses included in net loss
|
|
|
- |
|
|
|
36,349 |
|
Total
other comprehensive loss
|
|
|
(20,427 |
) |
|
|
(863,650 |
) |
Comprehensive
loss
|
|
$ |
(99,713 |
) |
|
$ |
(1,897,893 |
) |
Loss
per share - basic and diluted
|
|
$ |
- |
|
|
$ |
(0.05 |
) |
Weighted
average shares - basic and diluted
|
|
|
23,683,252 |
|
|
|
19,164,950 |
|
Revenues
Revenues
for the three months ended June 30, 2010 increased to $21,659,883 from
$10,648,686 for the three months ended June 30, 2009, an increase of
103%. Growth was driven by record retention of existing clients and a
record number of new advertisers and campaigns reflecting increased demand for
interCLICK’s innovative audience targeting solution. The Company also
generated the highest effective CPM (“eCPM”) in its history resulting from our
ability to maximize value on behalf of clients.
Given the
continued overall growth in online advertising, coupled with other strategic
initiatives undertaken by interCLICK, including the continued enhancement of our
OSM platform and our continued ability to acquire top tier advertising
impressions from publishers, we expect to continue to increase our advertising
customer base and revenues on a year-over-year basis for the foreseeable
future.
Revenues
from branded advertisers account for the substantial majority of our
revenues. During the three months ended June 30, 2010, 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, 2010 increased to $12,034,487 from
$5,882,655 for the three months ended June 30, 2009, an increase of
105%. The increase is primarily attributable to the growth in
advertising campaigns requiring the purchase of appropriate levels of
advertising impressions from publishers and higher third-party data fees. Cost
of revenues is comprised primarily of the amounts we paid to website publishers
on interCLICK’s online advertising network, amounts paid to third-party data
providers, and ad serving and rich media expenses directly associated with a
given campaign. Cost of revenues represented 55.6% of revenues for
the three months ended June 30, 2010 compared to 55.2% of revenues for the three
months ended June 30, 2009. The increase is primarily attributable to a
proportionally greater mix of advertising impressions purchased from premium
website publishers and higher third-party data fees. This increase
was partially offset by: (1) improvements in our supply chain management
platform, resulting in a better match between acquired advertising impressions
and advertising campaign demand, and (2) targeting efficiencies achieved through
OSM.
Gross
profit for the three months ended June 30, 2010 increased to $9,625,396 from
$4,766,031 for the three months ended June 30, 2009, an increase of 102%.
Our gross margin was 44.4% for the three months ended June 30, 2010
compared to 44.8% for the three months ended June 30, 2009. We expect
gross margins will remain in the mid-40’s percentage range in the
near-term.
Operating
Expenses
Operating
expenses consist of general and administrative, sales and marketing, technology
support, and amortization of intangible assets. These are discussed
in further detail below. Total operating expenses for the three
months ended June 30, 2010 increased to $8,419,790 from $5,477,950 for the three
months ended June 30, 2009, an increase of 54%. The increase is
primarily attributable to significant headcount expansion from 64 employees as
of June 30, 2009 to 96 employees as of June 30, 2010, expenditures necessary to
support interCLICK’s increased business, and a net cease-use charge of
approximately $432,000 relating to the Company’s expansion
into larger headquarters. The majority of hiring was in
the technology, product and operations areas to support the growth of our
business and the ongoing innovation, development and marketing of our technology
platform, including OSM. We expect to hire approximately two
dozen new employees throughout the remainder or 2010.
General and Administrative
General
and administrative expenses consist primarily of executive, administrative,
operations and product support compensation (including stock based
compensation), facilities costs, insurance, depreciation, professional fees,
investor relations fees and bad debt expense. General and
administrative expenses for the three months ended June 30, 2010 increased to
$3,873,745 from $2,895,717 for the three months ended June 30, 2009, an increase
of 34%. The increase is primarily attributable to our headcount
expansion, expenditures necessary to support interCLICK’s increased business,
and a net cease-use charge of approximately $432,000 relating to the Company’s
expansion into a larger headquarters. General and administrative
expenses represented 17.9% of revenues for the three months ended June 30, 2010
compared to 27.2% of revenues for the three months ended June 30,
2009.
Sales
and Marketing
Sales and
marketing expenses consist primarily of compensation (including stock based
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, 2010 increased to $3,087,183 from $1,734,921 for the three
months ended June 30, 2009, an increase of 78%. The increase is
primarily attributable to our headcount expansion. Sales and
marketing expenses represented 14.3% of revenues for the three months ended June
30, 2010 compared to 16.3% of revenues for the three months ended June 30,
2009.
Technology
Support
Technology
support consists primarily of compensation (including stock based compensation)
of technology support and related resources. Technology support and related
resources have been directed primarily towards continued enhancement of our
platform, including integration of third party data providers, upgrades to our
advertising serving platform, and ongoing maintenance and improvement of our
technology infrastructure. Technology support expenses for the three
months ended June 30, 2010 increased to $1,419,362 from $797,552 for the three
months ended June 30, 2009, an increase of 78%. The increase is primarily
attributable to our headcount expansion and expenditures necessary to support
interCLICK’s increased business and our development of OSM. Technology support
expenses represented 6.6% of revenues for the three months ended June 30, 2010
compared to 7.5% of revenues for the three months ended June 30,
2009.
Amortization
of Intangible Assets
Amortization
of intangible assets includes amortization of customer relationships, developed
technology and a domain name acquired through the Desktop acquisition in
2007. Amortization of intangible assets for the three months ended
June 30, 2010 decreased to $39,500 from $49,760 for the three months ended June
30, 2009, a decrease of 21%. The decrease is primarily attributable
to the customer relationships being fully depreciated at December 31, 2009.
Amortization of
intangible assets represented 0.2% of revenues for the three months ended June
30, 2010 compared to 0.5% of revenues for the three months ended June 30,
2009.
Net
Loss
Net loss
for the three months ended June 30, 2010 was ($79,286) compared to ($1,034,243)
for the three months ended June 30, 2009. The change was primarily
attributable to strong revenue, gross profit growth, operating expenses growing
at a slower pace than revenues, and lower warrant derivative liability expense,
partially offset by higher tax expense.
Reconciliation
of GAAP to Non-GAAP Measure
|
|
For
the Three
|
|
|
For
the Three
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Unaudited
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
GAAP
net loss
|
|
$ |
(79,286 |
) |
|
$ |
(1,034,243 |
) |
Income
tax expense
|
|
|
1,218,234 |
|
|
|
- |
|
Income
(loss) before income taxes
|
|
|
1,138,948 |
|
|
|
(1,034,243 |
) |
Interest
expense
|
|
|
74,537 |
|
|
|
126,681 |
|
Interest
income
|
|
|
(8,151 |
) |
|
|
- |
|
Warrant
derivative liability expense
|
|
|
272 |
|
|
|
159,294 |
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
36,349 |
|
Operating
income (loss)
|
|
|
1,205,606 |
|
|
|
(711,919 |
) |
Stock-based
compensation
|
|
|
972,488 |
|
|
|
777,173 |
|
Amortization
of intangible assets
|
|
|
39,500 |
|
|
|
49,760 |
|
Depreciation
|
|
|
177,394 |
|
|
|
74,978 |
|
EBITDA
|
|
$ |
2,394,988 |
|
|
$ |
189,992 |
|
Six
Months Ended June 30, 2010 Compared with Six Months Ended June 30,
2009
The
following table presents our results of operations for the six months ended June
30, 2010 and 2009. The following discussion of our costs reflects the
reclassification of our expense categories we implemented in the third quarter
of 2009; all prior periods have been retroactively adjusted.
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Unaudited
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
Revenues
|
|
$ |
35,861,740 |
|
|
$ |
19,071,977 |
|
Cost
of revenues
|
|
|
19,853,668 |
|
|
|
10,356,934 |
|
Gross
profit
|
|
|
16,008,072 |
|
|
|
8,715,043 |
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
7,104,273 |
|
|
|
4,573,382 |
|
Sales
and marketing
|
|
|
5,203,897 |
|
|
|
3,151,443 |
|
Technology
support
|
|
|
2,758,940 |
|
|
|
1,381,883 |
|
Amortization
of intangible assets
|
|
|
79,000 |
|
|
|
99,520 |
|
Total
operating expenses
|
|
|
15,146,110 |
|
|
|
9,206,228 |
|
Operating
income (loss) from continuing operations
|
|
|
861,962 |
|
|
|
(491,185 |
) |
Other
income (expense):
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
17,019 |
|
|
|
12 |
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
(36,349 |
) |
Other
than temporary impairment of available-for-sale securities
|
|
|
(458,538 |
) |
|
|
- |
|
Warrant
derivative liability income (expense)
|
|
|
21,413 |
|
|
|
(232,061 |
) |
Interest
expense
|
|
|
(176,946 |
) |
|
|
(240,273 |
) |
Total
other expense
|
|
|
(597,052 |
) |
|
|
(508,671 |
) |
Income
(loss) from continuing operations before income taxes
|
|
|
264,910 |
|
|
|
(999,856 |
) |
Income
tax expense
|
|
|
(139,126 |
) |
|
|
- |
|
Income
(loss) from continuing operations
|
|
|
125,784 |
|
|
|
(999,856 |
) |
Loss
from discontinued operations
|
|
|
- |
|
|
|
(1,220 |
) |
Net
income (loss)
|
|
|
125,784 |
|
|
|
(1,001,076 |
) |
Other
comprehensive loss:
|
|
|
|
|
|
|
|
|
Unrealized
losses on securities:
|
|
|
|
|
|
|
|
|
Unrealized
loss on available-for-sale-securities
|
|
|
(478,965 |
) |
|
|
(899,999 |
) |
Reclassification
adjustments for losses included in net income (loss)
|
|
|
458,538 |
|
|
|
36,349 |
|
Total
other comprehensive loss
|
|
|
(20,427 |
) |
|
|
(863,650 |
) |
Comprehensive
income (loss)
|
|
$ |
105,357 |
|
|
$ |
(1,864,726 |
) |
Basic
and diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
Discontinued
operations
|
|
|
- |
|
|
|
- |
|
Net
income (loss)
|
|
$ |
0.01 |
|
|
$ |
(0.05 |
) |
Weighted
average shares:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,646,178 |
|
|
|
19,044,443 |
|
Diluted
|
|
|
24,820,111 |
|
|
|
19,044,443 |
|
Revenues
Revenues
for the six months ended June 30, 2010 increased to $35,861,740 from $19,071,977
for the six months ended June 30, 2009, an increase of 88%. Growth
was driven by strong retention of existing clients and a greater number of new
client campaigns reflecting increased demand for interCLICK’s innovative
audience targeting solution.
Given the
continued overall growth in online advertising, coupled with other strategic
initiatives undertaken by interCLICK, including the continued enhancement of our
OSM platform and our continued ability to acquire top tier advertising
impressions from publishers, we expect to continue to increase our advertising
customer base and revenues on a year-over-year basis for the foreseeable
future.
Revenues
from branded advertisers account for the substantial majority of our
revenues. During the six months ended June 30, 2010, 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, 2010 increased to $19,853,668 from
$10,356,934 for the six months ended June 30, 2009, an increase of
92%. The increase is primarily attributable to the growth in
advertising campaigns requiring the purchase of appropriate levels of
advertising impressions from publishers and higher third-party data fees. Cost
of revenues is comprised primarily of the amounts we paid to website publishers
on interCLICK’s online advertising network, amounts paid to third-party data
providers, and ad serving and rich media expenses directly associated with a
given campaign. Cost of revenues represented 55.4% of revenues for
the six months ended June 30, 2010 compared to 54.3% of revenues for the six
months ended June 30, 2009. The increase is primarily attributable to a
proportionally greater mix of advertising impressions purchased from premium
website publishers and higher third-party data fees. This increase
was partially offset by: (1) improvements in our supply chain management
platform, resulting in a better match between acquired advertising impressions
and advertising campaign demand, and (2) targeting efficiencies achieved through
OSM.
Gross
profit for the six months ended June 30, 2010 increased to $16,008,072 from
$8,715,043 for the six months ended June 30, 2009, an increase of 84%. Our
gross margin was 44.6% for the six months ended June 30, 2010 compared to
45.7% for the six months ended June 30, 2009.
Operating
Expenses
Operating
expenses consist of general and administrative, sales and marketing, technology
support, and amortization of intangible assets. These are discussed
in further detail below. Total operating expenses for the six months
ended June 30, 2010 increased to $15,146,110 from $9,206,228 for the six months
ended June 30, 2009, an increase of 65%. The increase is primarily
attributable to significant headcount expansion from 64 employees as of June 30,
2009 to 96 employees as of June 30, 2010, expenditures necessary to support
interCLICK’s increased business, and a net cease-use charge of approximately
$432,000 relating to the Company’s expansion into larger
headquarters. The majority of hiring was in the technology, product
and operations areas to support the growth of our business and the ongoing
innovation, development and marketing of our technology platform, including
OSM.
General and Administrative
General
and administrative expenses consist primarily of executive, administrative,
operations and product support compensation (including stock based
compensation), facilities costs, insurance, depreciation, professional fees,
investor relations fees and bad debt expense. General and
administrative expenses for the six months ended June 30, 2010 increased to
$7,104,273 from $4,573,382 for the six months ended June 30, 2009, an increase
of 55%. The increase is primarily attributable to our headcount
expansion, expenditures necessary to support interCLICK’s increased business,
and a net cease-use charge of approximately $432,000 relating to the Company’s
expansion into a larger headquarters. General and
administrative expenses represented 19.8% of revenues for the six months ended
June 30, 2010 compared to 24.0% of revenues for the six months ended June 30,
2009.
Sales
and Marketing
Sales and
marketing expenses consist primarily of compensation (including stock based
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, 2010 increased to $5,203,897 from $3,151,443 for the six
months ended June 30, 2009, an increase of 65%. The increase is
primarily attributable to our headcount expansion. Sales and
marketing expenses represented 14.5% of revenues for the six months ended June
30, 2010 compared to 16.5% of revenues for the six months ended June 30,
2009.
Technology
Support
Technology
support consists primarily of compensation (including stock based compensation)
of technology support and related resources. Technology support and related
resources have been directed primarily towards continued enhancement of our
platform, including integration of third party data providers, upgrades to our
advertising serving platform, and ongoing maintenance and improvement of our
technology infrastructure. Technology support expenses for the six months
ended June 30, 2010 increased to $2,758,940 from $1,381,883 for the six months
ended June 30, 2009, an increase of 100%. The increase is primarily attributable
to our headcount expansion and expenditures necessary to support interCLICK’s
increased business and our development of OSM. Technology support expenses
represented 7.7% of revenues for the six months ended June 30, 2010 compared to
7.2% of revenues for the six months ended June 30, 2009.
Amortization
of Intangible Assets
Amortization
of intangible assets includes amortization of customer relationships, developed
technology and a domain name acquired through the Desktop acquisition in
2007. Amortization of intangible assets for the six months ended June
30, 2010 decreased to $79,000 from $99,520 for the six months ended June 30,
2009, a decrease of 21%. The decrease is primarily attributable to
the customer relationships being fully depreciated at December 31, 2009. Amortization of
intangible assets represented 0.2% of revenues for the six months ended June 30,
2010 compared to 0.5% of revenues for the six months ended June 30,
2009.
Net
Income
Net
income for the six months ended June 30, 2010 was $125,784 compared to a net
loss of ($1,001,076) for the six months ended June 30, 2009. The
change was primarily attributable to strong revenue, gross profit growth,
operating expenses growing at a slower pace than revenue, and lower warrant
derivative liability expense, partially offset by higher tax
expense.
Reconciliation
of GAAP to Non-GAAP Measures
|
|
For
the Six
|
|
|
For
the Six
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Unaudited
|
|
June
30, 2010
|
|
|
June
30, 2009
|
|
GAAP
net income (loss)
|
|
$ |
125,784 |
|
|
$ |
(1,001,076 |
) |
Loss
from discontinued operations
|
|
|
- |
|
|
|
1,220 |
|
Income
(loss) from continuing operations
|
|
|
125,784 |
|
|
|
(999,856 |
) |
Income
tax expense
|
|
|
139,126 |
|
|
|
- |
|
Income
(loss) from continuting operations before income taxes
|
|
|
264,910 |
|
|
|
(999,856 |
) |
Interest
expense
|
|
|
176,946 |
|
|
|
240,273 |
|
Interest
income
|
|
|
(17,019 |
) |
|
|
(12 |
) |
Warrant
derivative liability expense
|
|
|
(21,413 |
) |
|
|
232,061 |
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
36,349 |
|
Other
than temporary impairment of available-for sale securities
|
|
|
458,538 |
|
|
|
- |
|
Operating
income (loss) from continuing operations
|
|
|
861,962 |
|
|
|
(491,185 |
) |
Stock-based
compensation
|
|
|
1,822,070 |
|
|
|
1,353,743 |
|
Amortization
of intangible assets
|
|
|
79,000 |
|
|
|
99,520 |
|
Depreciation
|
|
|
320,356 |
|
|
|
147,364 |
|
EBITDA
|
|
$ |
3,083,388 |
|
|
$ |
1,109,442 |
|
Liquidity
and Capital Resources
Net cash
provided by operating activities during the six months ended June 30, 2010
totaled $945,139 and resulted primarily from stock-based compensation of
$1,822,070, other than temporary impairment of available-for-sale securities of
$458,538, an increase in deferred rent of $525,302, and depreciation of
$320,356, partially offset by a change in deferred taxes of $594,417 and
decreases in accrued expenses of $672,309, income taxes payable of $515,306 and
accounts payable of $442,026.
Net cash
used in investing activities during the six months ended June 30, 2010 totaled
$1,855,639 and resulted primarily from a $1,292,960 increase in restricted cash
and $573,929 used for purchases of property and equipment.
Net cash
used in financing activities during the six months ended June 30, 2010 was
$1,820,688 and resulted primarily from net repayments under our credit facility
of $1,981,113, partially offset by proceeds received from stock options and
warrants exercised of $228,732.
On
November 13, 2008, interCLICK entered into a revolving credit facility (the
“Agreement”) with Crestmark Commercial Capital Lending, LLC to finance certain
eligible accounts receivables of interCLICK in an amount up to $3.5 million
(subsequently increased to $4.5 million on February 3, 2009, increased to $5.5
million on April 30, 2009, and increased to $7.0 million on September 2,
2009). The credit facility is secured by substantially all of the
assets of interCLICK, except property and equipment financed
elsewhere. Effective May 12, 2010, either interCLICK or Crestmark may
terminate the Agreement with 60 days prior written notice to the other party
without being subject to any early termination fee. On July 12, 2010,
the Company provided Crestmark with notification of termination of the Agreement
effective September 10, 2010. The Company is in advanced discussions
with another lender about establishing a replacement line of credit which would
likely be secured by most of the Company’s assets.
At June
30, 2010, interCLICK had working capital of $18,821,159, including $9,922,770 in
cash and cash equivalents and $997,390 in near-term restricted
cash. interCLICK’s working capital is impacted by the seasonal nature
of its business, whereby revenue and receivables are typically weakest in the
first quarter and strongest in the fourth quarter. As of August
9, 2010, interCLICK had approximately $9,400,000 of cash and cash
equivalents and $1,300,000 in total restricted cash. Due to this cash
position, full use of the credit facility has recently not been
necessary. As our business has expanded, interCLICK has delivered
positive EBITDA for the last seven quarters. We discuss this non-GAAP
financial measure and its limitations under Company Overview
above. interCLICK continues to expand and had year-over-year revenue growth
in each quarter of 2009 and in the first half of 2010. Management
anticipates that revenues will continue to increase through 2010. In
addition to our cash and cash equivalents, the unused amount under the Crestmark
credit facility was approximately $5,800,000 at August 9,
2010. The Crestmark facility will terminate in September 2010 and is
expected to be replaced by a larger 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.
During
six months ended June 30, 2010, we acquired $1,152,599 in capital assets,
including $495,600 through conventional capital leases and $83,070 through
leasehold improvements in exchange for deferred rent. These additions
further enhance the features and scale of our technology assets, which
are necessary both to support the realization of growth objectives as well
as to advance interCLICK’s present competitive position. During the
remainder of 2010, we expect to acquire between approximately $500,000 and
$800,000 in additional capital assets, a portion of which will likely be
financed through capital leases.
Related
Party Transactions
No
related party transactions had a material impact on our operating
results.
New
Accounting Pronouncements
See
Note 2 to our financial statements included in this report for discussion of
recent accounting pronouncements.
Critical
Accounting Estimates
Management’s
discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these 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 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 investment in
available-for-sale securities, valuation of common shares, options and warrants
granted for services or recorded as debt discounts or other non-cash purposes
including business combinations, the valuation allowance on deferred tax assets,
estimates of the tax effects of business combinations and sale of subsidiary,
and estimates in equity investee’s losses. 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.
Management
is particularly attentive to the length account receivable collection cycles and
the attendant possibility of an increase in bad debts. However,
collection performance improved during 2009 and during the six months ended June
30, 2010 at which time the Company’s bad debt reserve was $210,172, or 1.0% of
gross accounts receivable, as compared to $383,188, or 1.7% of gross accounts
receivable, as of December 31, 2009.
Management
is sensitive to the carrying value of the 7,043,585 OPMG shares held on the
balance sheet at $225,394 at June 30, 2010. These shares are valued based
on the quoted market price which is expected to continue to
fluctuate. As of December 31, 2009, management concluded that private
transactions were among the most economically feasible ways to sell any portion
of the Company’s investment in OPMG shares as trading volume in OPMG was too
thinly traded and therefore did not reliably occur in an active
market. This change in estimate is based on management’s conclusion
that during the six months ended June 30, 2010, OPMG’s trading volume has
increasingly stabilized and thus is now a reliable basis for fair
valuation. In the future, we may attempt to sell some OPMG shares in
the open market which could materially reduce the carrying value of our
investment. See Notes 5 and 7 to the condensed consolidated
financial statements.
Cautionary
Note Regarding Forward-Looking Statements
This
report contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 including anticipated revenues,
expected increases in our advertising customer base, expected gross margins,
expected hiring of new employees, having sufficient cash and borrowing capacity
to meet its working capital for at least the next 12 months and expectations
regarding acquiring additional capital assets. Forward-looking
statements can be identified by words such as “anticipates,” “intends,” “plans,”
“seeks,” “believes,” “estimates,” “expects” and similar references to future
periods.
Forward-looking
statements are based on our current expectations and assumptions regarding our
business, the economy and other future conditions. Because forward-looking
statements relate to the future, they are subject to inherent uncertainties,
risks and changes in circumstances that are difficult to predict. Our actual
results may differ materially from those contemplated by the forward-looking
statements. We caution you therefore against relying on any of these
forward-looking statements. They are neither statements of historical fact nor
guarantees or assurances of future performance. Important factors that could
cause actual results to differ materially from those in the forward-looking
statements include the impact of intense competition, the continuation or
worsening of current economic conditions, a potential decrease in corporate
advertising spending, a potential decrease in consumer spending and the
condition of the domestic and global credit and capital markets.
Further
information on our risk factors is contained in our filings with the SEC,
including our Form 10-K for the year ended December 31, 2009. Any
forward-looking statement made by us in this report speaks only as of the date
on which it is made. Factors or events that could cause our actual
results to differ may emerge from time to time, and it is not possible for us to
predict all of them. We undertake no obligation to publicly update any
forward-looking statement, whether as a result of new information, future
developments or otherwise, except as may be required by law.
Item
3.
|
Quantitative
and Qualitative Disclosures About Market
Risk.
|
Not
applicable to smaller reporting companies
Item
4.
|
Controls
and Procedures.
|
Evaluation of Disclosure
Controls and Procedures. Our management carried out an
evaluation, with the participation of our Principal Executive Officer and
Principal Financial Officer, required by Rule 13a-15 of the Securities
Exchange Act of 1934 (the “Exchange Act”) of the effectiveness of our disclosure
controls and procedures as defined in Rule 13a-15(e) under the Exchange Act.
Based on that evaluation, our Principal Executive Officer and Principal
Financial Officer concluded that our disclosure controls and
procedures were effective as of the end of the period covered by this
report to ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms and
is accumulated and communicated to our management, including our Principal
Executive Officer and Principal Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.
Changes in Internal Control
Over Financial Reporting. There were no changes in our internal control
over financial reporting as defined in Rule 13a-15(f) under the Exchange Act
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 (the “Act”).
Name
or Class
|
|
Date
Sold
|
|
No. of
Securities
|
|
Consideration
|
Warrant
holder (1)
|
|
May
7, 2010
|
|
50,980
shares of common stock
|
|
Cashless
exercise of warrants with exercise price of $2.80 per
share
|
(1)
|
Exemption
under Section 3(a)(9) of the
Act.
|
Item
3.
|
Defaults
Upon Senior Securities.
|
None
Item
4.
|
(Removed
and Reserved).
|
Item
5.
|
Other
Information.
|
None
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed or
Furnished
|
|
#
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Customer
Acquisition Network Agreement of Merger and Plan of Reorganization
**
|
|
8-K
|
|
9/4/07
|
|
2.1
|
|
|
|
2.2
|
|
Desktop
Agreement and Plan of Merger **
|
|
8-K
|
|
9/4/07
|
|
2.2
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation
|
|
8-K
|
|
8/30/07
|
|
3.1
|
|
|
|
3.2
|
|
Certificate
of Amendment to the Articles of Incorporation
|
|
8-K
|
|
7/1/08
|
|
3.1
|
|
|
|
3.3
|
|
Certificate
of Amendment to the Articles of Incorporation
|
|
8-A12b
|
|
11/3/09
|
|
3.3
|
|
|
|
3.4
|
|
Amended
and Restated Bylaws, as amended
|
|
S-3/A
|
|
11/25/09
|
|
3.6
|
|
|
|
10.1
|
|
Amended
and Restated 2007 Incentive Stock and Award Plan *
|
|
|
|
|
|
|
|
Filed
|
|
31.1
|
|
Certification
of Principal Executive Officer (Section 302)
|
|
|
|
|
|
|
|
Filed
|
|
31.2
|
|
Certification
of Principal Financial Officer (Section 302)
|
|
|
|
|
|
|
|
Filed
|
|
32.1
|
|
Certification
of Principal Executive Officer and Principal Financial Officer
(Section 906)
|
|
|
|
|
|
|
|
Furnished
|
|
*
|
Management
compensatory plan or arrangement.
|
**
|
The
confidential disclosure schedules are not filed in accordance with SEC
Staff policy, but will be provided to the Staff upon request.
Certain material agreements contain representations and warranties,
which are qualified by the following
factors:
|
|
a.
|
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;
|
|
|
|
|
b.
|
the
agreement may have different standards of materiality than standards of
materiality under applicable securities laws;
|
|
|
|
|
c.
|
the
representations are qualified by a confidential disclosure schedule that
contains nonpublic information that is not material under applicable
securities laws;
|
|
|
|
|
d.
|
facts
may have changed since the date of the agreements; and
|
|
|
|
|
e.
|
only
parties to the agreements and specified third-party beneficiaries have a
right to enforce the agreements.
|
Notwithstanding
the above, any information contained in a schedule that would cause a reasonable
investor (or that a reasonable investor would consider important in making a
decision) to buy or sell our common stock has been included. We have been
further advised by our counsel that in all instances the standard of materiality
under the federal securities laws will determine whether or not information has
been omitted; in other words, any information that is not material under the
federal securities laws may be omitted. Furthermore, information which may have
a different standard of materiality will nonetheless be disclosed if material
under the federal securities laws.
Copies of
this report (including the financial statements) and any of the exhibits
referred to above will be furnished at no cost to our shareholders who make a
written request to interCLICK, Inc., 11 West 19th Street,
10th
Floor, New York, NY 10011 Attention: Secretary.
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.
|
|
|
|
|
|
|
|
/s/ Michael
Mathews
|
|
|
|
Michael
Mathews
|
|
|
|
Chief
Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
|
August
16, 2010
|
|
/s/ Roger
Clark
|
|
|
|
Roger
Clark
|
|
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Financial Officer)
|
|
EXHIBIT
INDEX
Exhibit
|
|
|
|
Incorporated by Reference
|
|
Filed or
Furnished
|
|
#
|
|
Exhibit Description
|
|
Form
|
|
Date
|
|
Number
|
|
Herewith
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.1
|
|
Customer
Acquisition Network Agreement of Merger and Plan of Reorganization
**
|
|
8-K
|
|
9/4/07
|
|
2.1
|
|
|
|
2.2
|
|
Desktop
Agreement and Plan of Merger **
|
|
8-K
|
|
9/4/07
|
|
2.2
|
|
|
|
3.1
|
|
Amended
and Restated Certificate of Incorporation
|
|
8-K
|
|
8/30/07
|
|
3.1
|
|
|
|
3.2
|
|
Certificate
of Amendment to the Articles of Incorporation
|
|
8-K
|
|
7/1/08
|
|
3.1
|
|
|
|
3.3
|
|
Certificate
of Amendment to the Articles of Incorporation
|
|
8-A12b
|
|
11/3/09
|
|
3.3
|
|
|
|
3.4
|
|
Amended
and Restated Bylaws, as amended
|
|
S-3/A
|
|
11/25/09
|
|
3.6
|
|
|
|
10.1
|
|
Amended
and Restated 2007 Incentive Stock and Award Plan*
|
|
|
|
|
|
|
|
Filed
|
|
31.1
|
|
Certification
of Principal Executive Officer (Section 302)
|
|
|
|
|
|
|
|
Filed
|
|
31.2
|
|
Certification
of Principal Financial Officer (Section 302)
|
|
|
|
|
|
|
|
Filed
|
|
32.1
|
|
Certification
of Principal Executive Officer and Principal Financial Officer
(Section 906)
|
|
|
|
|
|
|
|
Furnished
|
|
*
|
Management
compensatory plan or arrangement.
|