Unassociated Document
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For the
quarterly period ended September 30, 2010
OR
|
|
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 19 th
Street, 10 th
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 November 11, 2010
|
Common
Stock, $0.001 par value per share
|
|
23,969,011
shares
|
TABLE
OF CONTENTS
|
Page
|
PART
I – FINANCIAL INFORMATION
|
F-1
|
|
|
Item
1.
|
|
Financial
Statements
|
F-1
|
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets (unaudited)
|
F-2
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations and Comprehensive Income (Loss)
(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
|
3
|
|
|
|
|
Item
3.
|
|
Quantitative
and Qualitative Disclosures about Market Risk
|
11
|
|
|
|
|
Item
4.
|
|
Controls
and Procedures
|
12
|
|
|
|
|
PART
II – OTHER INFORMATION
|
12
|
|
|
Item
1.
|
|
Legal
Proceedings
|
12
|
|
|
|
|
Item 1A.
|
|
Risk
Factors
|
12
|
|
|
|
|
Item
2.
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
12
|
|
|
|
|
Item
3.
|
|
Defaults
Upon Senior Securities
|
12
|
|
|
|
|
Item
4.
|
|
(Removed
and Reserved)
|
12
|
|
|
|
|
Item
5.
|
|
Other
Information
|
12
|
|
|
|
|
Item
6.
|
|
Exhibits
|
13
|
|
|
|
|
SIGNATURES
|
13
|
PART
I – FINANCIAL INFORMATION
INTERCLICK,
INC. AND SUBSIDIARY
INDEX
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
|
|
Page
|
Item
1. Financial Statements
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets – September 30, 2010 (unaudited) and December
31, 2009
|
|
F-2
|
Condensed
Consolidated Statements of Operations and Comprehensive Income (Loss) for
the three and nine months ended September 30, 2010 and 2009
(unaudited)
|
|
F-3
|
Condensed
Consolidated Statement of Changes in Stockholders' Equity for the nine
months ended September 30, 2010 (unaudited)
|
|
F-4
|
Condensed
Consolidated Statements of Cash Flows for the nine months ended September
30, 2010 and 2009 (unaudited)
|
|
F-5
|
Notes
to Condensed Consolidated Financial Statements (unaudited)
|
|
F-7
|
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
|
|
(Unaudited)
|
|
|
(See
Note 1)
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$ |
10,992,013 |
|
|
$ |
12,653,958 |
|
Restricted
cash
|
|
|
998,097 |
|
|
|
- |
|
Accounts
receivable, net of allowance for doubtful accounts of $453,490 and
$383,188, respectively
|
|
|
30,135,090 |
|
|
|
21,631,305 |
|
Line
of credit reserve
|
|
|
- |
|
|
|
1,052,167 |
|
Deferred
taxes, current portion
|
|
|
828,950 |
|
|
|
955,471 |
|
Prepaid
expenses and other current assets
|
|
|
377,086 |
|
|
|
367,183 |
|
Total
current assets
|
|
|
43,331,236 |
|
|
|
36,660,084 |
|
|
|
|
|
|
|
|
|
|
Restricted
cash
|
|
|
296,090 |
|
|
|
- |
|
Property
and equipment, net of accumulated depreciation and amortization of
$1,100,014 and $597,288, respectively
|
|
|
1,724,268 |
|
|
|
988,899 |
|
Intangible
assets, net of accumulated amortization of $1,027,850 and $909,350,
respectively
|
|
|
302,833 |
|
|
|
421,333 |
|
Goodwill
|
|
|
7,909,571 |
|
|
|
7,909,571 |
|
Investment
in available-for-sale marketable securities
|
|
|
119,741 |
|
|
|
715,608 |
|
Deferred
line of credit costs, net of accumulated amortization of $3,271 and
$35,028, respectively
|
|
|
122,570 |
|
|
|
4,972 |
|
Deferred
taxes, net of current portion
|
|
|
3,118,416 |
|
|
|
2,579,568 |
|
Other
assets
|
|
|
207,573 |
|
|
|
192,179 |
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
$ |
57,132,298 |
|
|
$ |
49,472,214 |
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$ |
12,833,212 |
|
|
$ |
10,934,236 |
|
Accrued
expenses (includes accrued compensation of $2,220,083 and $2,241,731,
respectively)
|
|
|
3,227,108 |
|
|
|
3,164,044 |
|
Line
of credit payable
|
|
|
5,200,000 |
|
|
|
5,260,834 |
|
Income
taxes payable
|
|
|
790,375 |
|
|
|
515,306 |
|
Obligations
under capital leases, current portion
|
|
|
351,810 |
|
|
|
161,940 |
|
Deferred
rent, current portion (includes cease use liability of $75,603 at
September 30, 2010)
|
|
|
86,440 |
|
|
|
3,508 |
|
Warrant
derivative liability
|
|
|
- |
|
|
|
69,258 |
|
Total
current liabilities
|
|
|
22,488,945 |
|
|
|
20,109,126 |
|
|
|
|
|
|
|
|
|
|
Obligations
under capital leases, net of current portion
|
|
|
514,114 |
|
|
|
338,562 |
|
Deferred
rent (includes cease use liability of $326,434 at September 30,
2010)
|
|
|
632,102 |
|
|
|
83,823 |
|
Total
liabilities
|
|
|
23,635,161 |
|
|
|
20,531,511 |
|
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
23,837,335
and 23,632,707 issued and outstanding, respectively
|
|
|
23,837 |
|
|
|
23,633 |
|
Additional
paid-in capital
|
|
|
45,414,208 |
|
|
|
42,229,293 |
|
Accumulated
deficit
|
|
|
(11,940,908 |
) |
|
|
(13,312,223 |
) |
Total
stockholders’ equity
|
|
|
33,497,137 |
|
|
|
28,940,703 |
|
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity
|
|
$ |
57,132,298 |
|
|
$ |
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
AND
COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
|
For the Three
Months Ended
September 30, 2010
|
|
|
For the Three
Months Ended
September 30, 2009
|
|
|
For the Nine
Months Ended
September 30, 2010
|
|
|
For the Nine
Months Ended
September 30, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
26,442,854 |
|
|
$ |
14,395,236 |
|
|
$ |
62,304,594 |
|
|
$ |
33,467,213 |
|
Cost
of revenues
|
|
|
14,292,265 |
|
|
|
7,141,926 |
|
|
|
34,145,933 |
|
|
|
17,498,860 |
|
Gross
profit
|
|
|
12,150,589 |
|
|
|
7,253,310 |
|
|
|
28,158,661 |
|
|
|
15,968,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
4,143,866 |
|
|
|
3,348,581 |
|
|
|
11,248,139 |
|
|
|
7,921,964 |
|
Sales
and marketing
|
|
|
3,563,827 |
|
|
|
2,320,507 |
|
|
|
8,767,724 |
|
|
|
5,471,950 |
|
Technology
support
|
|
|
1,517,621 |
|
|
|
862,535 |
|
|
|
4,276,561 |
|
|
|
2,244,417 |
|
Amortization
of intangible assets
|
|
|
39,500 |
|
|
|
49,760 |
|
|
|
118,500 |
|
|
|
149,280 |
|
Total
operating expenses
|
|
|
9,264,814 |
|
|
|
6,581,383 |
|
|
|
24,410,924 |
|
|
|
15,787,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income from continuing operations
|
|
|
2,885,775 |
|
|
|
671,927 |
|
|
|
3,747,737 |
|
|
|
180,742 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
7,682 |
|
|
|
- |
|
|
|
24,701 |
|
|
|
12 |
|
Warrant
derivative liability income (expense)
|
|
|
- |
|
|
|
(274,725 |
) |
|
|
21,413 |
|
|
|
(506,786 |
) |
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(36,349 |
) |
Other
than temporary impairment of available-for-sale securities
|
|
|
(126,080 |
) |
|
|
- |
|
|
|
(584,618 |
) |
|
|
- |
|
Interest
expense
|
|
|
(19,429 |
) |
|
|
(245,854 |
) |
|
|
(196,375 |
) |
|
|
(486,127 |
) |
Total
other expense
|
|
|
(137,827 |
) |
|
|
(520,579 |
) |
|
|
(734,879 |
) |
|
|
(1,029,250 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
2,747,948 |
|
|
|
151,348 |
|
|
|
3,012,858 |
|
|
|
(848,508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
(1,502,417 |
) |
|
|
- |
|
|
|
(1,641,543 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
|
1,245,531 |
|
|
|
151,348 |
|
|
|
1,371,315 |
|
|
|
(848,508 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on sale of discontinued operations, net of income taxes
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,220 |
) |
Loss
from discontinued operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,220 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss)
|
|
|
1,245,531 |
|
|
|
151,348 |
|
|
|
1,371,315 |
|
|
|
(849,728 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on available-for-sale securities
|
|
|
(105,653 |
) |
|
|
- |
|
|
|
(584,618 |
) |
|
|
(899,999 |
) |
Reclassification
adjustments for losses included in net income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
36,349 |
|
Other
than temporary impairment of available-for-sale securities
|
|
|
126,080 |
|
|
|
- |
|
|
|
584,618 |
|
|
|
- |
|
Total
other comprehensive income (loss)
|
|
|
20,427 |
|
|
|
- |
|
|
|
- |
|
|
|
(863,650 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive
income (loss)
|
|
$ |
1,265,958 |
|
|
$ |
151,348 |
|
|
$ |
1,371,315 |
|
|
$ |
(1,713,378 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
0.06 |
|
|
$ |
(0.04 |
) |
Discontinued
operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
0.06 |
|
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing
operations
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
0.06 |
|
|
$ |
(0.04 |
) |
Discontinued
operations
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
income
|
|
$ |
0.05 |
|
|
$ |
0.01 |
|
|
$ |
0.06 |
|
|
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of common shares - basic
|
|
|
23,750,068 |
|
|
|
20,628,042 |
|
|
|
23,681,188 |
|
|
|
19,578,110 |
|
Weighted
average number of common shares - diluted
|
|
|
24,620,768 |
|
|
|
22,399,847 |
|
|
|
24,748,108 |
|
|
|
19,578,110 |
|
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 NINE MONTHS ENDED SEPTEMBER 30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
Other
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Comprehensive
|
|
|
Accumulated
|
|
|
Stockholders'
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Income (Loss)
|
|
|
Deficit
|
|
|
Equity
|
|
Balances,
January 1, 2010
|
|
|
23,632,707 |
|
|
$ |
23,633 |
|
|
$ |
42,229,293 |
|
|
$ |
- |
|
|
$ |
(13,312,223 |
) |
|
$ |
28,940,703 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
- |
|
|
|
- |
|
|
|
2,800,566 |
|
|
|
- |
|
|
|
- |
|
|
|
2,800,566 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuances
of restricted shares
|
|
|
10,100 |
|
|
|
10 |
|
|
|
(10 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common shares for stock options and warrants exercised
|
|
|
194,528 |
|
|
|
194 |
|
|
|
336,513 |
|
|
|
- |
|
|
|
- |
|
|
|
336,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of
warrant derivative liability to equity upon expiration of
price protection
|
|
|
- |
|
|
|
- |
|
|
|
47,846 |
|
|
|
- |
|
|
|
- |
|
|
|
47,846 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized
loss on available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(584,618 |
) |
|
|
- |
|
|
|
(584,618 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
than temporary impairment on available-for-sale securities
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
584,618 |
|
|
|
- |
|
|
|
584,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
1,371,315 |
|
|
|
1,371,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances,
September 30, 2010
|
|
|
23,837,335 |
|
|
$ |
23,837 |
|
|
$ |
45,414,208 |
|
|
$ |
- |
|
|
$ |
(11,940,908 |
) |
|
$ |
33,497,137 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
For the Nine
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
income (loss)
|
|
$ |
1,371,315 |
|
|
$ |
(849,728 |
) |
Add
back loss from discontinued operations, net
|
|
|
- |
|
|
|
1,220 |
|
Income
(loss) from continuing operations
|
|
|
1,371,315 |
|
|
|
(848,508 |
) |
Adjustments
to reconcile net income (loss) from continuing operations to net cash used
in operating activities:
|
|
|
|
|
|
|
|
|
Stock-based
compensation
|
|
|
2,800,566 |
|
|
|
1,953,884 |
|
Other
than temporary impairment of available-for-sale securities
|
|
|
584,618 |
|
|
|
- |
|
Depreciation
and amortization of property and equipment
|
|
|
502,726 |
|
|
|
225,281 |
|
Amortization
of intangible assets
|
|
|
118,500 |
|
|
|
149,280 |
|
Provision
for bad debts
|
|
|
103,241 |
|
|
|
(87,084 |
) |
Amortization
of deferred line of credit costs
|
|
|
8,243 |
|
|
|
24,972 |
|
Deferred
tax benefit
|
|
|
(412,327 |
) |
|
|
- |
|
Change
in warrant derivative liability
|
|
|
(21,413 |
) |
|
|
506,786 |
|
Loss
on sale of available-for-sale securities
|
|
|
- |
|
|
|
36,349 |
|
Amortization
of debt discount
|
|
|
- |
|
|
|
12,000 |
|
Changes
in cash attributable to changes in operating assets and
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(8,607,026 |
) |
|
|
(7,268,876 |
) |
Prepaid
expenses and other current assets
|
|
|
(9,903 |
) |
|
|
(155,341 |
) |
Other
assets
|
|
|
(15,394 |
) |
|
|
(515 |
) |
Accounts
payable
|
|
|
1,898,976 |
|
|
|
2,219,724 |
|
Accrued
expenses
|
|
|
25,564 |
|
|
|
1,521,435 |
|
Income
taxes payable
|
|
|
275,069 |
|
|
|
- |
|
Deferred
rent
|
|
|
548,141 |
|
|
|
13,573 |
|
Net
cash used in operating activities
|
|
|
(829,104 |
) |
|
|
(1,697,040 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from sale of available-for-sale securities
|
|
|
11,250 |
|
|
|
21,429 |
|
Payments
for restricted cash
|
|
|
(1,294,187 |
) |
|
|
- |
|
Purchases
of property and equipment
|
|
|
(659,425 |
) |
|
|
(86,851 |
) |
Net
cash used in investing activities
|
|
|
(1,942,362 |
) |
|
|
(65,422 |
) |
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from current line of credit
|
|
|
5,200,000 |
|
|
|
- |
|
Proceeds
from stock options and warrants exercised
|
|
|
336,707 |
|
|
|
15,200 |
|
(Repayments
to) proceeds from former line of credit, net
|
|
|
(4,208,667 |
) |
|
|
1,893,593 |
|
Payments
of deferred line of credit costs
|
|
|
(88,341 |
) |
|
|
- |
|
Principal
payments on capital leases
|
|
|
(130,178 |
) |
|
|
(8,108 |
) |
Proceeds
from common stock and warrants issued for cash
|
|
|
- |
|
|
|
2,257,000 |
|
Principal
payments on notes payable
|
|
|
- |
|
|
|
(400,000 |
) |
Net
cash provided by financing activities
|
|
|
1,109,521 |
|
|
|
3,757,685 |
|
|
|
|
|
|
|
|
|
|
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
|
|
|
(1,661,945 |
) |
|
|
1,745,223 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at beginning of period
|
|
|
12,653,958 |
|
|
|
183,871 |
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents at end of period
|
|
$ |
10,992,013 |
|
|
$ |
1,929,094 |
|
The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
INTERCLICK,
INC. AND SUBSIDIARY
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
|
|
For the Nine
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
|
|
Interest
paid
|
|
$ |
232,447 |
|
|
$ |
412,364 |
|
Income
taxes paid
|
|
$ |
1,693,535 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
Non-cash
investing and financing activities:
|
|
|
|
|
|
|
|
|
Property
and equipment acquired through capital 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 |
|
|
$ |
- |
|
Deferred
line of credit costs included in accrued expenses
|
|
$ |
37,500 |
|
|
$ |
- |
|
Unrealized
loss on available-for-sale securities
|
|
$ |
- |
|
|
$ |
863,650 |
|
Issuance
of common stock to eliminate or modify price protection for
warrants
|
|
$ |
- |
|
|
$ |
508,497 |
|
Issuance
of common stock for services to be rendered
|
|
$ |
- |
|
|
$ |
124,000 |
|
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
SEPTEMBER
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,
inc. is a technology company providing solutions for data-driven
advertising. Combining scalable media execution capabilities with
analytical expertise, interclick delivers exceptional results for
marketers. The Company’s proprietary Open Segment Manager (OSM)
platform organizes and valuates billions of data points daily to construct the
most responsive digital audiences for major digital
marketers. Substantially 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”).
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.
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 nine
months ended September 30, 2010 and 2009, our cash flows for the nine months
ended September 30, 2010 and 2009, our statement of changes in stockholders’
equity for the nine months ended September 30, 2010 and our financial position
as of September 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 has evaluated subsequent events for potential recognition and/or
disclosure through the date of issuance of these financial
statements.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
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 of America
(“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 the 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
condensed 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 third
parties. Upon satisfying the 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
bearing interest at 0.60% per annum, to a third party in connection with a
service agreement. In April 2010, July 2010 and October 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
capital 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 interest at 0.56% per annum, 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 lease agreement to relocate its New York
City headquarters to a larger space. 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 interest at 0.70% per annum,
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 September 30, 2010, the Company has
classified the certificate of deposit, including accrued interest, as restricted
cash, a non-current asset.
Property
and Equipment
Property
and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization 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
SEPTEMBER
30, 2010
(Unaudited)
Category
|
|
Depreciation Term
|
Computer
equipment
|
|
3-5
years
|
Software
|
|
3
years
|
Furniture
and fixtures
|
|
3-5
years
|
Office
equipment
|
|
3-5
years
|
Leasehold
improvements
|
|
5
years
|
Fair
Value Measurements
The
Company has adopted the provisions of Accounting Standards Codification (“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 have been reclassified in
order to conform to the 2010 presentation. The following tables show the
reclassifications to the condensed consolidated statements of operations for the
three and nine months ended September 30, 2009.
|
|
For the Three Months Ended September 30, 2009
|
|
|
|
|
|
|
Reclassifications
|
|
|
|
|
|
|
As
Previously
|
|
|
Compensation
and
|
|
|
As
|
|
|
|
Reported
|
|
|
Employee-Related
Costs
|
|
|
Reclassified
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$ |
3,383,752 |
|
|
$ |
(35,171 |
) |
|
$ |
3,348,581 |
|
Sales
and marketing
|
|
|
2,317,245 |
|
|
|
3,262 |
|
|
|
2,320,507 |
|
Technology
support
|
|
|
830,626 |
|
|
|
31,909 |
|
|
|
862,535 |
|
Amortization
of intangible assets
|
|
|
49,760 |
|
|
|
|
|
|
|
49,760 |
|
Total
operating expenses
|
|
$ |
6,581,383 |
|
|
|
|
|
|
$ |
6,581,383 |
|
|
|
For the Nine Months Ended September 30, 2009
|
|
|
|
|
|
|
Reclassifications
|
|
|
|
|
|
|
As Previously
|
|
|
Compensation and
|
|
|
As
|
|
|
|
Reported
|
|
|
Employee-Related Costs
|
|
|
Reclassified
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
$ |
8,021,106 |
|
|
$ |
(99,142 |
) |
|
$ |
7,921,964 |
|
Sales
and marketing
|
|
|
5,468,122 |
|
|
|
3,828 |
|
|
|
5,471,950 |
|
Technology
support
|
|
|
2,149,103 |
|
|
|
95,314 |
|
|
|
2,244,417 |
|
Amortization
of intangible assets
|
|
|
149,280 |
|
|
|
|
|
|
|
149,280 |
|
Total
operating expenses
|
|
$ |
15,787,611 |
|
|
|
|
|
|
$ |
15,787,611 |
|
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
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 condensed 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 Financial Accounting Standards Board (“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.
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 September 30, 2010 and December 31,
2009:
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
Computer
equipment
|
|
$ |
2,288,221 |
|
|
$ |
1,433,461 |
|
Furniture
and fixtures
|
|
|
195,596 |
|
|
|
72,711 |
|
Software
|
|
|
144,258 |
|
|
|
57,572 |
|
Leasehold
improvements
|
|
|
173,764 |
|
|
|
- |
|
Office
equipment
|
|
|
22,443 |
|
|
|
22,443 |
|
|
|
|
2,824,282 |
|
|
|
1,586,187 |
|
Accumulated
depreciation and amortization
|
|
|
(1,100,014 |
) |
|
|
(597,288 |
) |
Property
and equipment, net
|
|
$ |
1,724,268 |
|
|
$ |
988,899 |
|
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
In
February 2010, the Company acquired $495,600 of computer equipment under a
capital lease agreement. Property and equipment held under capital
leases of $1,015,965 and $520,365 at September 30, 2010 and December 31, 2009,
respectively, are included in computer equipment above.
Depreciation
and amortization expense for the nine months ended September 30, 2010 and 2009
was $502,726 and $225,281, of which $129,775 and $4,404, respectively, pertained
to capital leases. Accumulated depreciation and amortization amounted
to $1,100,014 and $597,288, of which $146,926 and $17,152 pertained to capital
leases, as of September 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 September 30, 2010 and December 31, 2009:
|
|
September 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
|
|
|
(1,027,850 |
) |
|
|
(909,350 |
) |
Intangible
assets, net
|
|
$ |
302,833 |
|
|
$ |
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.
The
following is a schedule of estimated future amortization expense of intangible
assets as of September 30, 2010:
Year Ending December 31,
|
|
|
|
2010
|
|
$ |
39,500 |
|
2011
|
|
|
158,000 |
|
2012
|
|
|
105,333 |
|
Total
|
|
$ |
302,833 |
|
Note
5. Investment in Available-For-Sale Marketable
Securities
The
following represents information about available-for sale securities held at
September 30, 2010:
Securities
in loss positions
|
|
Amortized
|
|
|
Aggregate
|
|
|
Aggregate
|
|
less than 12 months
|
|
Cost Basis
|
|
|
Unrealized losses
|
|
|
Fair Value
|
|
Options
Media Group Holdings, Inc. ("OPMG")
|
|
$ |
119,741 |
|
|
$ |
- |
|
|
$ |
119,741 |
|
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
The
following represents information about available-for sale securities held at
December 31, 2009:
Securities
in loss positions
|
|
Amortized
|
|
|
Aggregate
|
|
|
Aggregate
|
|
less than 12 months
|
|
Cost Basis
|
|
|
Unrealized losses
|
|
|
Fair Value
|
|
Options
Media Group Holdings, Inc. ("OPMG")
|
|
$ |
715,608 |
|
|
$ |
- |
|
|
$ |
715,608 |
|
As of
September 30, 2010, the Company determined that its investment in OPMG shares
was other-than-temporarily impaired to $0.017 per share (from a carrying basis
of $0.0349 per share) and recognized an other-than-temporary impairment of
$126,080 for the three months ended September 30, 2010, resulting in an
aggregate other-than-temporary impairment loss of $584,618 for the nine months
ended September 30, 2010. This was based primarily on the extent and
length of time over which the investment had been in a continuous unrealized
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.
As of
June 30, 2010, the Company determined that its investment in OPMG shares was
temporarily impaired due to the relatively short amount of time OPMG had traded
under $0.0349 per share. Thus, the Company valued its investment at
$225,394 as of June 30, 2010, and an unrealized loss of $20,427 had been
recognized in other comprehensive loss for the three months ended June 30,
2010. This unrealized loss was reversed during the three months ended
September 30, 2010, due to the other-than-temporary impairment recognized at
September 30, 2010.
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 carrying basis of
$0.10 per share) and recognized an other-than-temporary impairment of $458,538
during the three months ended March 31, 2010. This was based
primarily on the extent and length of time over which the investment had been in
a continuous unrealized loss position and the Company’s belief that it was
unlikely OPMG’s stock price would increase significantly in the foreseeable
future. Furthermore, the Company had not conducted any private sale
transactions and had not received any offers to buy shares at any
price.
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.
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.
Note
6. Line of Credit Agreements and Capital Lease Obligations
Current
Line of Credit
On
September 10, 2010, the Company entered into a Loan and Security Agreement (the
“Loan Agreement”) with Silicon Valley Bank (“SVB”). Under the Loan
Agreement, SVB has committed to make advances to the Company in an aggregate
amount up to $15,000,000, subject to the availability of eligible account
receivables. The Loan Agreement has a two-tier borrowing
system. Under the first tier, which applies if the Company’s Adjusted
Quick Ratio (“AQR”) (as defined) is at least 1.25 to 1.0, the Company may
request an advance based on eligible accounts receivable on an aggregate
basis. Under the second tier, which applies if the Company’s AQR is
less than 1.25 to 1.0, advances will be based on specific
invoices. Repayment of advances under the Loan Agreement are due and
payable on the earliest of (i) the date on which payment is received on the
account receivable with respect to which the advance was made (the “Financed
Receivable”), (ii) the date on which the Financed Receivable is no longer
eligible for an advance, (iii) the date on which any adjustment is asserted
against the Financed Receivable, (iv) the date on which there is a breach of any
representation, warranty or covenant in the Loan Agreement or, (v) 728 days from
the effective date of the Loan Agreement. Advances under both tiers bear
interest at a rate per annum equal to SVB’s prime rate (4.00% at September 30,
2010) plus 2.5%. In addition, advances under the second tier incur a
monthly handling fee of 0.15% of each Financed Receivable. All
accrued and unpaid interest and handling fees are payable on a monthly
basis. The line of credit requires no unused line fee, monthly
monitoring fee, or minimum interest charge and expires on September 10,
2012.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
The Loan
Agreement is secured by substantially all of the Company’s
assets. The Loan Agreement contains affirmative covenants that, among
other things, require the Company to deliver to SVB specified financial
information on an annual and monthly basis and to maintain an AQR of no less
than 1.0 to 1.0. The Loan Agreement also contains negative covenants
that limit the Company’s ability to (or to permit any subsidiaries to), subject
to certain exceptions and limitations, merge with or acquire other companies,
create liens on its property, incur debt obligations, enter into transactions
with affiliates, except on an arm’s length basis, dispose of property or issue
dividends or make distributions. Any failure by the Company to comply
with these covenants and any other obligations under the Loan Agreement could
result in an event of default which could lead to acceleration of the amounts
owed and other remedies. The Company was in compliance with all
covenants as of September 30, 2010.
As of
September 30, 2010, the balance outstanding on the SVB line of credit was
$5,200,000. As of September 30, 2010, the Company had $9,800,000 of
borrowing capacity available under the SVB line of credit based on the
availability of eligible accounts receivable.
Former
Line of Credit
On
November 13, 2008, the Company entered into a line of credit, 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 line of
credit had an interest rate equal to prime plus 1.0% and was 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 paid 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 was
paid. The Crestmark line of credit 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.
As of
September 30, 2010, the Company has repaid all outstanding amounts owed by the
Company to Crestmark under the Agreement and Crestmark has terminated its
security interest in the Company’s assets.
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 September 30, 2010 and December
31, 2009:
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
Capital
lease obligations
|
|
$ |
865,924 |
|
|
$ |
500,502 |
|
Less:
Current maturities
|
|
|
(351,810 |
) |
|
|
(161,940 |
) |
Amount
due after one year
|
|
$ |
514,114 |
|
|
$ |
338,562 |
|
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.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
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 September 30, 2010 and December
31, 2009:
|
|
Total
Carrying
|
|
|
Fair
Value Measurements at
|
|
|
Total
Carrying
|
|
|
Fair
Value Measurements at
|
|
|
|
Value
at
|
|
|
September
30, 2010
|
|
|
Value
at
|
|
|
December
31, 2009
|
|
|
|
September
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
|
|
$ |
119,741 |
|
|
$ |
119,741 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
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.
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 the Company 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
our 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.
The
valuation technique of the investment in available-for-sale marketable
securities changed during the three months ended March 31,
2010. During 2010, 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 for the basis of fair
value. Commencing 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. As of September 30, 2010, OPMG’s
closing market price was $0.017 per share.
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.
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
SEPTEMBER
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 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 September 30, 2010, the
Company has classified the certificate of deposit, including accrued interest,
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 $402,037 at September 30, 2010, of which $326,434 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 $645,355 through December 31, 2010 and
$864,000 in 2011. Under the agreements, the Company has expensed
$1,698,123 in fees during the nine months ended September 30, 2010.
Legal
Matters
From time
to time, the Company may be involved in litigation relating to claims arising
out of our operations in the normal course of business. As of September 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
September 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 23,837,335 and
23,632,707 shares were issued and outstanding at September 30, 2010 and December
31, 2009, respectively.
During
the nine months ended September 30, 2010, proceeds of $336,707 were received and
an aggregate of 194,528 shares were issued as a result of stock option and
warrant exercises.
Stock
Warrants
A summary
of the Company’s warrant activity during the nine months ended September 30,
2010 is presented below:
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Warrants
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance
Outstanding, December 31, 2009
|
|
|
1,286,809 |
|
|
$ |
3.51 |
|
|
|
|
|
|
|
Granted
|
|
|
25,000 |
|
|
$ |
4.44 |
|
|
|
|
|
|
|
Exercised
|
|
|
(251,250 |
) |
|
$ |
2.80 |
|
|
|
|
|
|
|
Forfeited
|
|
|
(60,000 |
) |
|
$ |
4.24 |
|
|
|
|
|
|
|
Expired
|
|
|
(5,000 |
) |
|
$ |
11.14 |
|
|
|
|
|
|
|
Balance
Outstanding, September 30, 2010
|
|
|
995,559 |
|
|
$ |
3.63 |
|
|
|
2.1 |
|
|
$ |
609,594 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
September 30, 2010
|
|
|
983,059 |
|
|
$ |
3.62 |
|
|
|
2.1 |
|
|
$ |
609,594 |
|
Warrant
exercises during the nine months ended September 30, 2010, include 163,750
warrants exercised on a cashless basis. Such cashless exercises resulted in the
issuance of 62,445 shares of common stock.
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 September 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
($506,786) during the nine months ended September 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 nine months ended September 30, 2010, the Company granted 816,250 stock
options, all of which were under the 2007 Award Plan, at various exercise prices
ranging from $3.52 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 nine
months ended September 30, 2010 was $2,325,173, which is being recognized over
the respective vesting periods. During the nine months ended
September 30, 2010 and 2009, the Company recorded compensation expense of
$2,535,868 and $1,715,206, respectively, in connection with employee stock
options.
As of
September 30, 2010, 1,234,900 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
nine months ended September 30, 2010 and 2009:
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
|
|
For
the Nine
|
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Assumptions
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
Expected
life (years)
|
|
|
3.5
- 3.75 |
|
|
|
5.0 |
|
Expected
volatility
|
|
|
98.6%
- 110.1 |
% |
|
|
115.5%
- 121.4 |
% |
Weighted-average
volatility
|
|
|
105.1 |
% |
|
|
119.6 |
% |
Risk-free
interest rate
|
|
|
0.69%
- 2.69 |
% |
|
|
1.89%
- 2.86 |
% |
Dividend
yield
|
|
|
0.00 |
% |
|
|
0.00 |
% |
Expected
forfeiture rate
|
|
|
8.1 |
% |
|
|
3.2 |
% |
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
nine months ended September 30, 2010 is presented below:
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number
of
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
Options
|
|
Shares
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
Balance
Outstanding, December 31, 2009
|
|
|
4,994,167 |
|
|
$ |
2.69 |
|
|
|
|
|
|
|
Granted
|
|
|
816,250 |
|
|
$ |
4.15 |
|
|
|
|
|
|
|
Exercised
|
|
|
(44,583 |
) |
|
$ |
2.06 |
|
|
|
|
|
|
|
Forfeited
|
|
|
(269,375 |
) |
|
$ |
3.28 |
|
|
|
|
|
|
|
Expired
|
|
|
(49,167 |
) |
|
$ |
2.00 |
|
|
|
|
|
|
|
Balance
Outstanding, September 30, 2010
|
|
|
5,447,292 |
|
|
$ |
2.89 |
|
|
|
3.3 |
|
|
$ |
6,927,353 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable,
September 30, 2010
|
|
|
2,627,289 |
|
|
$ |
2.27 |
|
|
|
2.7 |
|
|
$ |
4,663,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
to vest post September 30, 2010
|
|
|
2,665,128 |
|
|
$ |
3.45 |
|
|
|
3.9 |
|
|
$ |
2,180,488 |
|
The
weighted-average grant-date fair value of options granted to employees during
the nine months ended September 30, 2010 and 2009 was $2.85 and $2.25,
respectively. The total intrinsic value of options exercised by
employees during the nine months ended September 30, 2010 and 2009 was $138,401
and $100,800, 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.
During
the nine months ended September 30, 2010 and 2009, the Company recognized an
aggregate amount of $84,933 and $19,656 of stock-based compensation for
nonvested shares of common stock issued to employees.
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
Number
of
|
|
|
Grant
Date
|
|
Nonvested Shares
|
|
Shares
|
|
|
Fair Value
|
|
Nonvested
at December 31, 2009
|
|
|
73,594 |
|
|
$ |
4.21 |
|
Granted
|
|
|
7,600 |
|
|
$ |
5.21 |
|
Vested
|
|
|
(19,073 |
) |
|
$ |
3.55 |
|
Forfeited
|
|
|
- |
|
|
$ |
- |
|
Nonvested
at September 30, 2010
|
|
|
62,121 |
|
|
$ |
4.54 |
|
The total
fair value of shares vested to employees during the nine months ended September
30, 2010 was $79,078.
As of
September 30, 2010, there was $6,728,163 of total unrecognized compensation
costs related to nonvested stock-based compensation
arrangements. That cost is expected to be recognized over a
weighted-average period of 1.2 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
September 30, 2010 at $55,750 and, accordingly, $44,135 was recognized as
stock-based compensation during the nine months ended September 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 nine months ended September 30, 2010 and 2009, the Company recognized an
aggregate amount of $179,765 and $157,022 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. 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 three months ended September 30,
2010 and 2009 and for the nine months ended September 30, 2010 were as
follows:
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
|
|
For the Three Months Ended September 30,
2010
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Net
income
|
|
$ |
1,245,531 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$ |
1,245,531 |
|
|
|
23,750,068 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
- |
|
|
|
732,843 |
|
|
|
|
|
Stock
warrants
|
|
|
- |
|
|
|
129,860 |
|
|
|
|
|
Nonvested
shares
|
|
|
- |
|
|
|
7,997 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders + assumed
conversions
|
|
$ |
1,245,531 |
|
|
|
24,620,768 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
For the Three Months Ended September 30,
2009
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Income
from continuing operations
|
|
$ |
151,348 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$ |
151,348 |
|
|
|
20,628,042 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
- |
|
|
|
1,565,617 |
|
|
|
|
|
Warrants
|
|
|
- |
|
|
|
158,012 |
|
|
|
|
|
Nonvested
common stock
|
|
|
- |
|
|
|
23,448 |
|
|
|
|
|
Convertible
debt
|
|
|
1,496 |
|
|
|
24,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders + assumed
conversions
|
|
$ |
152,844 |
|
|
|
22,399,847 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
For the Nine Months Ended September 30,
2010
|
|
|
|
Income
|
|
|
Shares
|
|
|
Per-Share
|
|
|
|
(Numerator)
|
|
|
(Denominator)
|
|
|
Amount
|
|
Net
income
|
|
$ |
1,371,315 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders
|
|
$ |
1,371,315 |
|
|
|
23,681,188 |
|
|
$ |
0.06 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of Dilutive Securities
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
options
|
|
|
- |
|
|
|
858,915 |
|
|
|
|
|
Stock
warrants
|
|
|
- |
|
|
|
197,099 |
|
|
|
|
|
Nonvested
shares
|
|
|
- |
|
|
|
10,906 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
EPS
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
available to common stockholders + assumed
conversions
|
|
$ |
1,371,315 |
|
|
|
24,748,108 |
|
|
$ |
0.06 |
|
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
Options
to purchase 2,797,500 and 252,500 shares of common stock and warrants to
purchase 533,750 and 428,460 shares of common stock were outstanding during the
three months ended September 30, 2010 and 2009, respectively, but were not
included in the computation of diluted earnings per share because the effects
would have been anti-dilutive. In addition, 46,300 nonvested shares
were not included in the computation of diluted earnings per share for the three
months ended September 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 2,053,750 and 4,599,167 shares of common stock and warrants to
purchase 348,750 and 1,126,025 shares of common stock were outstanding during
the nine months ended September 30, 2010 and 2009, respectively, but were not
included in the computation of diluted earnings (loss) per share because the
effects would have been anti-dilutive. In addition, 46,300 and 23,448
nonvested shares were not included in the computation of diluted earnings per
share for the nine months ended September 30, 2010 and 2009, 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.
Note
11. Income Taxes
Income
tax expense amounting to $1,641,543 for the nine months ended September 30, 2010
is based on the Company's estimate of the effective tax rate expected to be
applicable for the full year 2010. The effective tax rate of 54.48%
for the nine months ended September 30, 2010 differs from the statutory federal
rate principally because of the effect 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 net income through the end of 2010.
In the
third quarter of 2010, the Company revised its estimated annual effective tax
rate to reflect a change in the apportionment factors used to calculate the
state income taxes. The effect of this change in estimate increased
income tax expense for the nine months ended September 30, 2010 by $347,366,
which was primarily a result of applying the revised tax rate to the deferred
tax balances as of December 31, 2009, offset by a reduction in the current state
tax expense.
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 September 30, 2010 and December 31, 2009, there was approximately
$12,648,000 and $13,336,000, respectively, in excess of insurable
limits.
Concentration
of Revenues, Accounts Receivable and Publisher Expense
For the
three and nine months ended September 30, 2010 and 2009, the Company had
concentrations of revenues with agency customers representing revenues equaling
10% or greater as follows:
|
|
For
the Three
|
|
|
For
the Three
|
|
|
For
the Nine
|
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
Agency
|
|
|
10.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
|
|
0.0 |
% |
Agency
|
|
|
0.0 |
% |
|
|
20.9 |
% |
|
|
10.0 |
% |
|
|
12.7 |
% |
Totals
|
|
|
10.0 |
% |
|
|
20.9 |
% |
|
|
10.0 |
% |
|
|
12.7 |
% |
At
September 30, 2010 and December 31, 2009, concentration of accounts receivable
with individual agency customers representing 10% or greater of accounts
receivable was as follows:
INTERCLICK,
INC. AND SUBSIDIARY
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER
30, 2010
(Unaudited)
|
|
September 30, 2010
|
|
|
December 31, 2009
|
|
Agency
|
|
|
11.2 |
% |
|
|
17.9 |
% |
Totals
|
|
|
11.2 |
% |
|
|
17.9 |
% |
For the
three and nine months ended September 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 Nine
|
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
|
September 30, 2010
|
|
|
September 30, 2009
|
|
Publisher
|
|
|
31.4 |
% |
|
|
33.6 |
% |
|
|
30.8 |
% |
|
|
25.0 |
% |
Totals
|
|
|
31.4 |
% |
|
|
33.6 |
% |
|
|
30.8 |
% |
|
|
25.0 |
% |
|
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 exclusive of interest, taxes, depreciation, amortization
(including stock-based compensation), and other income and expense of a
non-operating nature. EBITDA should be viewed as supplemental to, and
is not, and should not be considered, an alternative to 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 (loss). See
pages 6 and 9 of this report.
Management
in its daily evaluation of the Company’s business affairs and analysis of its
monthly, quarterly and annual performance, makes certain of its decisions based
on EBITDA. 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 of a recurring
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
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. (“interclick” or the “Company”) is a technology company providing solutions
for data-driven advertising. Combining scalable media execution
capabilities with analytical expertise, interclick delivers exceptional results
for marketers. The Company’s proprietary Open Segment Manager (OSM)
platform organizes and valuates billions of data points daily to construct the
most responsive digital audiences for major digital marketers.
We
generate our revenue through the sale of online display advertising which is
placed on third-party publisher websites. Substantially 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) branded advertisers 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 September 30, 2010 increased 84% to $26,442,854 from $14,395,236 for
the prior year comparable period; revenues for the nine months ended
September 30, 2010 increased 86% to $62,304,594 from $33,467,213 for the
prior year comparable
period;
|
|
·
|
Gross profit margin for the three
months ended September 30, 2010 was 46.0% as compared to 50.4% in the
prior year comparable period; gross profit margin for the nine months
ended September 30, 2010 was 45.2% as compared to 47.7% in the prior year
comparable period;
|
|
·
|
Headcount increased to 107 people
at September 30, 2010, from 69 people at the end of the prior year
comparable period;
|
|
·
|
EBITDA for the three months ended
September 30, 2010 increased to $4,086,141 compared to $1,399,745 in the
prior year comparable period; EBITDA for the nine months ended September
30, 2010 increased to $7,169,529 compared to $2,509,187 in the prior year
comparable period;
|
|
·
|
Operating income for the three
months ended September 30, 2010 was $2,885,775 compared to $671,927 for
the three months ended September 30, 2009 and was $3,747,737 for the nine
months ended September 30, 2010 compared to $180,742 for the nine months
ended September 30, 2009;
and
|
|
·
|
Net income for the three months
ended September 30, 2010 was $1,245,531, or $0.05 per share, compared to
$151,348, or $0.01 per share, in the prior year comparable period; and net
income for the nine months ended September 30, 2010 was $1,371,315, or
$0.06 per share, compared to a net loss of ($849,728), or ($0.04) per
share, in the prior year comparable period. Results for the
three and nine months ended September 30, 2010 included an income tax
expense of $1,502,417 and $1,641,513, respectively; results for the three
and nine months ended September 30, 2010 included an other than temporary
impairment of available-for-sale-securities of $126,080 and $584,618,
respectively.
|
Results of
Operations
Three
Months Ended September 30, 2010 Compared with Three Months Ended September 30,
2009
The
following table is derived from our results of operations for the three months
ended September 30, 2010 and 2009:
|
|
For the Three
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
Unaudited
|
|
September 30,
2010
|
|
|
September 30,
2009
|
|
Revenues
|
|
$
|
26,442,854
|
|
|
$
|
14,395,236
|
|
Cost
of revenues
|
|
|
14,292,265
|
|
|
|
7,141,926
|
|
Gross
profit
|
|
|
12,150,589
|
|
|
|
7,253,310
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
4,143,866
|
|
|
|
3,348,581
|
|
Sales
and marketing
|
|
|
3,563,827
|
|
|
|
2,320,507
|
|
Technology
support
|
|
|
1,517,621
|
|
|
|
862,535
|
|
Amortization
of intangible assets
|
|
|
39,500
|
|
|
|
49,760
|
|
Total
operating expenses
|
|
|
9,264,814
|
|
|
|
6,581,383
|
|
Operating
income
|
|
|
2,885,775
|
|
|
|
671,927
|
|
Total
other expense
|
|
|
(137,827
|
)
|
|
|
(520,579
|
)
|
Income
before income taxes
|
|
|
2,747,948
|
|
|
|
151,348
|
|
Income
tax expense
|
|
|
(1,502,417
|
)
|
|
|
-
|
|
Net
income
|
|
$ |
1,245,531
|
|
|
$ |
151,348
|
|
Revenues
Revenues
for the three months ended September 30, 2010 increased to $26,442,854 from
$14,395,236 for the three months ended September 30, 2009, an increase of
84%. Growth was attributed to higher campaign revenue from both
existing and new clients seeking interclick’s data-driven
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.
Cost
of Revenues and Gross Profit
Cost of
revenues for the three months ended September 30, 2010 increased to $14,292,265
from $7,141,926 for the three months ended September 30, 2009, an increase of
100.1%. The increase is primarily attributable to the growth in
advertising campaigns requiring the purchase of appropriate levels of
advertising impressions from publishers. 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 54.0% of revenues for the
three months ended September 30, 2010 compared to 49.6% of revenues for the
three months ended September 30, 2009. The increase is primarily attributable to
an anomalous mix of higher margin advertising campaigns during the third quarter
of 2009. 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 September 30, 2010 increased to $12,150,589
from $7,253,310 for the three months ended September 30, 2009, an increase of
67.5%. Our gross margin was 46.0% for the three months ended
September 30, 2010 compared to 50.4% for the three months ended September 30,
2009. We expect gross margins will remain in the mid-40’s percentage
range, with minimal variability, 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 September 30, 2010 increased to $9,264,814 from $6,581,383 for the
three months ended September 30, 2009, an increase of $2,683,431 or
40.8%. The increase is primarily attributable to significant
headcount expansion from 69 employees as of September 30, 2009 to 107 employees
as of September 30, 2010, and expenditures necessary to support interclick’s
increased business. The majority of hiring was in the technology,
product and operations areas to support the growth of our business and the
ongoing innovation, development, maintenance, and marketing of our technology
platforms, including OSM. We expect to hire fewer than one 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 September 30, 2010 increased
to $4,143,866 from $3,348,581 for the three months ended September 30, 2009, or
23.7%. The increase is primarily attributable to our headcount
expansion and expenditures necessary to support interclick’s increased
business. General and administrative expenses represented 15.7% of
revenues for the three months ended September 30, 2010 compared to 23.3% of
revenues for the three months ended September 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 industry event expenses. Sales and marketing expenses for the
three months ended September 30, 2010 increased to $3,563,827 from $2,320,507
for the three months ended September 30, 2009, or 53.6%. The
increase is primarily attributable to our headcount expansion, as well as costs
incurred in connection with the Company’s re-branding
initiatives. Sales and marketing expenses represented 13.5% of
revenues for the three months ended September 30, 2010 compared to 16.1% of
revenues for the three months ended September 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 development and
enhancement of our platforms, including the 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 September 30, 2010 increased to $1,517,621
from $862,535 for the three months ended September 30, 2009, or 75.9%. The
increase is primarily attributable to our headcount expansion and expenditures
necessary to support interclick’s increased business and our development and
maintenance of our technology platforms, including OSM. Technology support
expenses represented 5.7% of revenues for the three months ended September 30,
2010 compared to 6.0% of revenues for the three months ended September 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
September 30, 2010 decreased to $39,500 from $49,760 for the three months ended
September 30, 2009, or 20.6%. The decrease is primarily attributable
to the customer relationships being fully depreciated at December 31, 2009.
Amortization of intangible assets represented 0.1% of revenues for the three
months ended September 30, 2010 compared to 0.3% of revenues for the three
months ended September 30, 2009.
Income
Taxes
Income tax expense for the three months
ended September 30, 2010 increased to $1,502,417 from $0 for the three months
ended September 30, 2009. The increase is primarily attributable to
the Company’s improved operating results and generation of taxable
income. The effective tax rate for the three months ended September
30, 2010 was 54.7%, which is expected to decrease in future periods. Income tax expenses
represented 5.7% of revenues for the three months ended September 30,
2010.
Net
Income
Net
income for the three months ended September 30, 2010 was $1,245,531 compared to
$151,348 for the three months ended September 30, 2009. The increase
was primarily attributable to strong revenue, gross profit growth, operating
expenses growing at a slower pace than revenues, lower warrant derivative
liability expense, and reduced interest expense due to less reliance on line of
credit borrowings for working capital needs, partially offset by the recognition
of income tax expense (due to the Company’s generating taxable income) and the
recognition of an other-than-temporary impairment on available for sale
securities.
Reconciliation
of GAAP to Non-GAAP Measure
|
|
For the Three
|
|
|
For the Three
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
Unaudited
|
|
September 30,
2010
|
|
|
September 30,
2009
|
|
GAAP net income
|
|
$
|
1,245,531
|
|
|
$
|
151,348
|
|
Income
tax expense
|
|
|
1,502,417
|
|
|
|
-
|
|
Income
before income taxes
|
|
|
2,747,948
|
|
|
|
151,348
|
|
Interest
expense
|
|
|
19,429
|
|
|
|
245,854
|
|
Interest
income
|
|
|
(7,682
|
)
|
|
|
-
|
|
Warrant
derivative liability expense
|
|
|
-
|
|
|
|
274,725
|
|
Other
than temporary impairment of available-for-sale securities
|
|
|
126,080
|
|
|
|
-
|
|
Operating
income
|
|
|
2,885,775
|
|
|
|
671,927
|
|
Stock-based
compensation
|
|
|
978,496
|
|
|
|
600,141
|
|
Amortization
of intangible assets
|
|
|
39,500
|
|
|
|
49,760
|
|
Depreciation
|
|
|
182,370
|
|
|
|
77,917
|
|
EBITDA
|
|
$
|
4,086,141
|
|
|
$
|
1,399,745
|
|
Nine Months Ended September 30, 2010
Compared with Nine Months Ended September 30, 2009
The
following table is derived from our results of operations for the nine months
ended September 30, 2010 and 2009.
|
|
For the Nine
|
|
|
For the Nine
|
|
|
|
Months Ended
|
|
|
Months Ended
|
|
Unaudited
|
|
September 30,
2010
|
|
|
September 30,
2009
|
|
Revenues
|
|
$
|
62,304,594
|
|
|
$
|
33,467,213
|
|
Cost
of revenues
|
|
|
34,145,933
|
|
|
|
17,498,860
|
|
Gross
profit
|
|
|
28,158,661
|
|
|
|
15,968,353
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
General
and administrative
|
|
|
11,248,139
|
|
|
|
7,921,964
|
|
Sales
and marketing
|
|
|
8,767,724
|
|
|
|
5,471,950
|
|
Technology
support
|
|
|
4,276,561
|
|
|
|
2,244,417
|
|
Amortization
of intangible assets
|
|
|
118,500
|
|
|
|
149,280
|
|
Total
operating expenses
|
|
|
24,410,924
|
|
|
|
15,787,611
|
|
Operating
income from continuing operations
|
|
|
3,747,737
|
|
|
|
180,742
|
|
Total
other expense
|
|
|
(734,879
|
)
|
|
|
(1,029,250
|
)
|
Income
(loss) from continuing operations before income taxes
|
|
|
3,012,858
|
|
|
|
(848,508
|
)
|
Income
tax expense
|
|
|
(1,641,543
|
)
|
|
|
-
|
|
Income
(loss) from continuing operations
|
|
|
1,371,315
|
|
|
|
(848,508
|
)
|
Loss
from discontinued operations
|
|
|
-
|
|
|
|
(1,220
|
)
|
Net
income (loss)
|
|
$ |
1,371,315
|
|
|
$ |
(849,728
|
)
|
Revenues
Revenues
for the nine months ended September 30, 2010 increased to $62,304,594 from
$33,467,213 for the nine months ended September 30, 2009, an increase of
86.2%. Growth was attributed to higher campaign revenue from both
existing and new clients seeking interclick’s data driven
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.
Cost
of Revenues and Gross Profit
Cost of
revenues for the nine months ended September 30, 2010 increased to $34,145,933
from $17,498,860 for the nine months ended September 30, 2009, an increase of
95.1%. 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 54.8% of revenues for
the nine months ended September 30, 2010 compared to 52.3% of revenues for the
nine months ended September 30, 2009. The increase is primarily attributable to
an anomalous mix of higher margin advertising campaigns during the third quarter
of 2009. 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 nine months ended September 30, 2010 increased to $28,158,661
from $15,968,353 for the nine months ended September 30, 2009, an increase of
76.3%. Our gross margin was 45.2% for the nine months ended September
30, 2010 compared to 47.7% for the nine months ended September 30,
2009. We expect gross margins will remain in the mid-40’s percentage
range, with minimal variability, 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 nine months
ended September 30, 2010 increased to $24,410,924 from $15,787,611 for the nine
months ended September 30, 2009, an increase of 54.6%. The increase
is primarily attributable to significant headcount expansion from 69 employees
as of September 30, 2009 to 107 employees as of September 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, maintenance, and marketing of our technology platforms,
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 nine months ended September 30, 2010 increased
to $11,248,139 from $7,921,964 for the nine months ended September 30, 2009, or
42.0%. 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 larger headquarters. General and administrative
expenses represented 18.1% of revenues for the nine months ended September 30,
2010 compared to 23.7% of revenues for the nine months ended September 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 industry event expenses. Sales and marketing expenses for the
nine months ended September 30, 2010 increased to $8,767,724 from $5,471,950 for
the nine months ended September 30, 2009, or 60.2%. The
increase is primarily attributable to our headcount expansion, as well as costs
incurred in connection with the Company’s re-branding
initiatives. Sales and marketing expenses represented 14.1% of
revenues for the nine months ended September 30, 2010 compared to 16.4% of
revenues for the nine months ended September 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 development and
enhancement of our platforms, including the 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 nine months ended September 30, 2010 increased to $4,276,561
from $2,244,417 for the nine months ended September 30, 2009, or 90.5%. The
increase is primarily attributable to our headcount expansion and expenditures
necessary to support interclick’s increased business and our development and
maintenance of our technology platforms, including OSM. Technology support
expenses represented 6.9% of revenues for the nine months ended September 30,
2010 compared to 6.7% of revenues for the nine months ended September 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 nine months ended
September 30, 2010 decreased to $118,500 from $149,280 for the nine months ended
September 30, 2009, or 20.6%. 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 nine months ended
September 30, 2010 compared to 0.4% of revenues for the nine months ended
September 30, 2009.
Income
Taxes
Income tax expense for the nine months
ended September 30, 2010 increased to $1,641,543 from $0 for the nine months
ended September 30, 2009. The increase is primarily attributable to
the Company’s improved operating results and generation of taxable
income. The effective tax rate for the nine months ended September
30, 2010 was 54.5%, which is expected to decrease in future periods. Income tax expenses
represented 2.6% of revenues for the nine months ended September 30,
2010.
Net
Income
Net
income for the nine months ended September 30, 2010 was $1,371,315 compared to a
loss of ($849,728) for the nine months ended September 30, 2009. The
increase was primarily attributable to strong revenue, gross profit growth,
operating expenses growing at a slower pace than revenues, warrant derivative
liability income in the current period, and reduced interest expense due to less
reliance on line of credit borrowings for working capital needs, partially
offset by the recognition of income tax expense (due to the Company’s generating
taxable income) and the recognition of an other-than-temporary impairment on
available for sale securities.
Reconciliation of GAAP to Non-GAAP
Measures
|
|
For
the Nine
|
|
|
For
the Nine
|
|
|
|
Months
Ended
|
|
|
Months
Ended
|
|
Unaudited
|
|
September 30,
2010
|
|
|
September 30,
2009
|
|
GAAP
net income (loss)
|
|
$
|
1,371,315
|
|
|
$
|
(849,728
|
)
|
Loss
from discontinued operations
|
|
|
-
|
|
|
|
1,220
|
|
Income
(loss) from continuing operations
|
|
|
1,371,315
|
|
|
|
(848,508
|
)
|
Income
tax expense
|
|
|
1,641,543
|
|
|
|
-
|
|
Income
(loss) from continuing operations before income taxes
|
|
|
3,012,858
|
|
|
|
(848,508
|
)
|
Interest
expense
|
|
|
196,375
|
|
|
|
486,127
|
|
Interest
income
|
|
|
(24,701
|
)
|
|
|
(12
|
)
|
Warrant
derivative liability (income) expense
|
|
|
(21,413
|
)
|
|
|
506,786
|
|
Loss
on sale of available-for-sale securities
|
|
|
-
|
|
|
|
36,349
|
|
Other
than temporary impairment of available-for sale securities
|
|
|
584,618
|
|
|
|
-
|
|
Operating
income from continuing operations
|
|
|
3,747,737
|
|
|
|
180,742
|
|
Stock-based
compensation
|
|
|
2,800,566
|
|
|
|
1,953,884
|
|
Amortization
of intangible assets
|
|
|
118,500
|
|
|
|
149,280
|
|
Depreciation
|
|
|
502,726
|
|
|
|
225,281
|
|
EBITDA
|
|
$
|
7,169,529
|
|
|
$
|
2,509,187
|
|
Liquidity and Capital
Resources
Net cash
used in operating activities during the nine months ended September 30, 2010
totaled $829,104 and resulted primarily from net income of $1,371,315, adjusted
for stock-based compensation of $2,800,566, an other than temporary impairment
of available-for-sale securities of $584,618, depreciation of $502,726 and a
deferred tax benefit of $412,327. These adjustments were offset in
part by increases in accounts receivable of $8,607,026, accounts payable of
$1,898,976, income taxes payable of $275,069 and deferred rent of
$548,141.
Net cash
used in investing activities during the nine months ended September 30, 2010
totaled $1,942,362 and resulted primarily from a $1,294,187 increase in
restricted cash (utilized to secure various letters of credit) and $659,425 used
for purchases of property and equipment.
Net cash
provided by financing activities during the nine months ended September 30, 2010
was $1,109,521 and resulted primarily from proceeds of $5,200,000 received under
the new Silicon Valley Bank (“SVB”) line of credit, and $336,707 received from
the exercise of stock options and warrants, offset by net repayments of
$4,208,667 under the former Crestmark Commercial Capital Lending, LLC
(“Crestmark”) line of credit.
On
September 10, 2010, the Company entered into a Loan and Security Agreement (the
“Loan Agreement”) with SVB. Under the Loan Agreement, SVB has
committed to make advances to the Company in an aggregate amount up to
$15,000,000, subject to the availability of eligible account
receivables. The Loan Agreement has a two-tier borrowing
system. Under the first tier, which applies if the Company’s Adjusted
Quick Ratio (“AQR”) (as defined) is at least 1.25 to 1.0, the Company may
request an advance based on eligible accounts receivable on an aggregate
basis. Under the second tier, which applies if the Company’s AQR is
less than 1.25 to 1.0, advances will be based on specific
invoices. Repayment of advances under the Loan Agreement are due and
payable on the earliest of (i) the date on which payment is received of the
account receivable with respect to which the advance was made (the “Financed
Receivable”), (ii) the date on which the Financed Receivable is no longer
eligible for an advance, (iii) the date on which any adjustment is asserted
against the Financed Receivable, (iv) the date on which there is a breach of any
representation, warranty or covenant in the Loan Agreement or, (v) 728 days from
the effective date of the Loan Agreement. Advances under both tiers bear
interest at a rate per annum equal to SVB’s prime rate (4.00% at September 30,
2010) plus 2.5%. In addition, advances under the second tier incur a
monthly handling fee of 0.15% of each Financed Receivable. All
accrued and unpaid interest and handling fees are payable on a monthly
basis. The line of credit requires no unused line fee, monthly
monitoring fee, or minimum interest charge and expires on September 10,
2012.
The Loan
Agreement is secured by a first priority perfected security interest in
substantially all of the Company’s assets. The Loan Agreement
contains affirmative covenants that, among other things, require the Company to
deliver to SVB specified financial information on an annual and monthly basis
and to maintain an AQR of no less than 1.0 to 1.0. The Loan Agreement
also contains negative covenants that limit the Company’s ability to (or to
permit any subsidiaries to), subject to certain exceptions and limitations,
merge with or acquire other companies, create liens on its property, incur debt
obligations, enter into transactions with affiliates, except on an arm’s length
basis, dispose of property or issue dividends or make
distributions. Any failure by the Company to comply with these
covenants and any other obligations under the Loan Agreement could result in an
event of default which could lead to acceleration of the amounts owed and other
remedies. The Company was in compliance with all covenants as of
September 30, 2010.
As of
September 30, 2010, the balance outstanding on the SVB line of credit was
$5,200,000. As of September 30, 2010, the Company had $9,800,000 of
borrowing capacity available under the SVB line of credit based on the
availability of eligible accounts receivable.
The
Company’s former line of credit was entered into with Crestmark on November 13,
2008, in the form of an Accounts Receivable Financing Agreement (the
“Agreement”), 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 line of credit had an interest rate equal to
prime plus 1.0% and was 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 paid 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 was paid. The Crestmark line of
credit 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. As of September 30, 2010, the Company has repaid all
outstanding amounts owed by the Company to Crestmark under the Agreement and
Crestmark has terminated its security interest in the Company’s
assets.
At
September 30, 2010, interclick had working capital of $20,842,291, including
$10,992,013 in cash and cash equivalents and $998,097 in near-term restricted
cash. interclick’s working capital is impacted by the seasonal nature
of its business, whereby revenue is typically weakest in the first quarter
and strongest in the fourth quarter. Accordingly, receivables are
typically highest in the fourth quarter. As of November 5, 2010,
interclick had approximately $12,255,000 of cash and cash equivalents and
$1,300,000 in total restricted cash. Due to this cash position, full
use of the current and former line of credit has recently not been
necessary. As our business has expanded, interclick has delivered
positive EBITDA for the last eight 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 three quarters of 2010. Management
anticipates that revenues will continue to increase year-over-year through 2010
and in 2011. 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
the nine months ended September 30, 2010, we acquired $1,238,095 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 up to $750,000 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 the 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.
In
response to the SEC’s financial reporting release, FR-60, “Cautionary Advice
Regarding Disclosure About Critical Accounting Policies”, the Company has
selected a more subjective accounting estimation processes for purposes of
explaining the methodology used in calculating estimates, in addition to the
inherent uncertainties pertaining to the estimate and the possible effects on
interclick’s financial condition. The accounting estimates are discussed below.
These estimates involve certain assumptions that if incorrect could create a
material adverse impact on the interclick’s results of operations and financial
condition.
Management
is particularly attentive to the length of account receivable collection cycles
and the related possibility of an increase in bad debts. However,
collection performance improved during 2009 and during the nine months ended
September 30, 2010, at which time the Company’s bad debt reserve was $453,490,
or 1.5% 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 $119,741 at September 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 nine months ended September 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 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,”
“projects,” “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, regulatory developments, 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 the following securities without registration under
the Securities Act of 1933 (the “Act”):
Name or Class
|
|
Date Sold
|
|
No. of Securities
|
|
Consideration
|
|
|
|
|
|
|
|
|
|
|
Warrant
holder(1)
|
|
August
16, 2010
|
|
37,500
shares of common stock
|
|
$ |
105,000 |
|
(1)
|
Exemption under Section 4(2) of
the Act.
|
Item 3.
|
Defaults Upon Senior
Securities.
|
None
Item 4.
|
(Removed and
Reserved).
|
Item 5.
|
Other
Information.
|
None
Exhibit
|
|
|
|
|
|
|
|
#
|
|
Exhibit Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
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.
|
|
|
|
|
|
November
12, 2010
|
|
/s/ Michael
Mathews
|
|
|
|
Michael
Mathews
|
|
|
|
Chief
Executive Officer
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
November
12, 2010
|
|
/s/ Roger
Clark
|
|
|
|
Roger
Clark
|
|
|
|
Chief
Financial Officer
|
|
|
|
(Principal
Financial Officer)
|
|
EXHIBIT
INDEX
Exhibit
|
|
|
|
|
|
|
|
#
|
|
Exhibit Description
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|