UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K




x
            ANNUAL REPORT PURSUANT TO SECTION
      13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
  1934





For the
fiscal year ended: December 31, 2009


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
              (I.R.S.
      Employerof
      Incorporation or Organization)
              Identification
      No.)





257 Park
Avenue South


Suite
602


New York,
NY 10010


(Address
of Principal Executive Office) (Zip Code)





(646)
722-6260


(Registrant’s
telephone number, including area code)






Securities
registered pursuant to Section 12(b) of the Act:





Title of each class
              
              Name of each exchange on which
      registeredCommon
      Stock, par value $0.001
              
              The
      NASDAQ Capital Market





Securities registered pursuant to
Section 12(g) of the Act:None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.


 ̈   Yes  
x  
No





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.


 ̈
  Yes   x
  No




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.      x   Yes   ̈ No





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232-405 of this
chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such
files.)    Yes   ̈No   ̈





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this  chapter) is not contained herein, and
will not be contained, to the best of registrant’s knowledge, in definitive
proxy or  information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form
10-K.      x




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.





Large
      accelerated filer
               ̈
              
              
              Accelerated
      filer
               ̈Non-accelerated
      filer
               ̈
              
              
              Smaller
      reporting company
              x





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act).   ̈
  Yes    x No





The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the closing price as of the last
business day of the registrant’s most recently completed second fiscal quarter
was approximately $45,860,171.





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.  23,694,272 shares were
outstanding as of March 26, 2010.







INDEX




Part
      IItem
      1. Business.
              3Item
      1A. Risk Factors.
              5Item
      1B. Unresolved Staff Comments.
              5Item
      2. Properties.
              5Item
      3. Legal Proceedings.
              5Item
      4. (Removed and Reserved).
              5PART
      IIItem
      5. Market for Registrant’s Common Equity, Related Stockholder Matters and
      Issuer Purchases of Equity Securities.
              6Item
      6. Selected Financial Data.
              7Item
      7. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations.
              7Item
      7A. Quantitative and Qualitative Disclosures About Market
      Risk.
              19Item
      8. Financial Statements and Supplementary Data.
              19Item
      9. Changes in and Disagreements With Accountants on Accounting and
      Financial Disclosure.
              19Item
      9A. Controls and Procedures.
              19Item
      9A(T). Controls and Procedures.
              19Item
      9B. Other Information.
              20PART
      IIIItem
      10. Directors, Executive Officers and Corporate
Governance.
              20Item
      11. Executive Compensation.
              23Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters.
              28Item
      13. Certain Relationships and Related Transactions, and Director
      Independence.
              29Item
      14. Principal Accountant Fees and Services.
              29PART
      IVItem
      15. Exhibits, Financial Statement Schedules.
              30


2





PART
I




Item
1.           Business.





Company
Overview





interCLICK,
Inc. is a next-generation online display advertising network that combines
complete data and inventory transparency with best in breed targeting solutions.
Powered by our proprietary data-enrichment technology platform, Open Segment
Manager (“OSM”), interCLICK develops coherent data strategies with
agencies empowering them to discover which facts drive optimal campaign
performance no matter what the objective is, and connecting them to their most
valuable audiences at unprecedented scale.  We generate our revenue
through the sale of online display advertising which is placed
on third party publisher websites.





Industry
Overview





According
to ThinkEquity LLC, the non-premium display advertising sector is projected to
be the highest-growth segment of the online advertising market.  For
the period from 2008 to 2013, ThinkEquity LLC expects non-premium display to
grow at a 22% compound annual growth rate. In its 2009 Internet Investment
Guide, J.P. Morgan stated that it believed that performance-based advertising
will continue to gain market share and that the recessionary environment will
only accelerate its growth.  Lower ad budgets and economic concerns
have made advertisers place a higher value on clear return on investments or
ROIs.  Based on our current experience, advertisers’ focus on “return
on ad spend” intensified with the weakened economy.  As such, we
expect market share gains will accrue to those ad networks with the most
advanced behavioral targeting capabilities.





Seasonality





Our
business is subject to seasonal fluctuations.  The fourth quarter of
the calendar year, during the holiday season, is our strongest with respect to
revenues.  While we are a relatively new company, our experience to
date and our management’s knowledge of the advertising industry indicates that
the first calendar quarter is our slowest quarter.  Because so many
advertisers operate on a calendar year, advertising decisions tend to be put off
until January when new budgets are implemented.  This has a tendency
to reduce revenues for the first quarter compared to other
quarters.




Customers





Our
clients are shifting more of their marketing budgets from traditional media
channels such as direct mail, television, radio and newspapers to the Internet
because of increasing usage of the Internet by their potential
customers.  We focus on providing measurable Internet marketing
services to our clients in a way that protects and enhances their brands and
their relationships with prospective customers.  In order to provide
opportunities for advertisers, we buy display advertising impressions from
publishers or companies that maintain websites and seek to monetize their
websites through the sale of advertising.  In 2009, we derived more
than 14% of our revenues from one customer.  In 2008, we derived more
than 10% of our revenues from a different customer, which was not a 10% customer
in 2007.  We deliver advertising campaigns for a wide variety of
advertisers and advertising agency partners with no overwhelming concentration
on any specific industry vertical.  As such, our existing advertiser
base includes numerous industries including, but not limited to, consumer
packaged goods, retail, electronics, Internet, computer software, automotive,
travel, pharmaceuticals, wireless communications and the entertainment
industry.





Sales
and Marketing





We sell
and market our solutions through our sales team of approximately two dozen
experienced sales persons as of March 2010.  We carefully select
industry-veteran sales managers adept at articulating our technically-driven,
value-oriented solutions.  As part of our strategic plan, we opened
sales offices in 2008 and early 2009 in Chicago, Los Angeles and San Francisco
as complements to the sales team based in our New York head
office.  We expect to increase our sales staff by more than 10% for
the balance of 2010.





We
believe that marketers are becoming increasingly focused on delivering specific
and measurable results.  Our clients want to better understand how
their marketing spending meets measurable objectives.


3





Competition




We face
intense competition in the Internet advertising market from other online
advertising and direct marketing networks for a share of client advertising
budgets.  We expect that this competition will continue to intensify
in the future as a result of industry consolidation, the maturation of the
industry and low barriers to entry.  Additionally, we compete for
advertising budgets with traditional media including television, radio,
newspapers and magazines.  Furthermore, many of the advertising,
media, and Internet companies possess greater resources and are more adequately
capitalized than interCLICK.  We compete for business on the basis of
a number of factors including ROI, price, access to targeted media, ability to
deliver large volumes or precise types of customer prospects and
reliability.




Our
ability to compete depends upon several factors, including the
following:




·
            the timing and market acceptance
      of our new solutions and enhancements to existing solutions developed by
      us;





·
            continuing our relationships with
      top quality publishers;





·
            our customer service and support
      efforts;





·
            our sales and marketing efforts;
      and





·
            our ability to add value to our
      clients and remain price
competitive.




Research
and Development Expenses





We
recognized research and development costs of $48,200 and $0 for the years ended
December 31, 2009 and December 31, 2008, respectively.  See below
for discussion regarding our anticipated innovation-related expenses in
2010.





Regulation





In
February 2009, the Federal Trade Commission (the “FTC”) issued informal guidance
about companies like us that engage in behavioral targeting.  The
essence of the report is that self regulation to protect privacy rights must
occur or the FTC will declare certain practices to be unfair trade
practices.  Our management viewed this FTC report as being favorable
and believes its business model will not be adversely affected from self
regulation.  Many states also have adopted what are commonly called
“Little FTC Unfair Trade Practice Acts.” State Acts include the power to seek
injunctions, triple damages and attorneys’ fees.





Employees





As of
March 19, 2010, interCLICK had a total of 91 employees, of which 90 were
full-time employees.  None of these employees is represented by a
labor union.  Management believes that our relations with our
employees are good.  At December 31, 2009, we had a total of 78
employees, of which 78 were full-time employees.




Corporate
History and Acquisitions





We were
formed in Delaware on March 4, 2002 under the name Outsiders Entertainment, Inc.
On August 28, 2007, we completed a reverse merger and acquired Customer
Acquisition Network, Inc.  In connection with the merger, we changed
our name to Customer Acquisition Network Holdings, Inc.  Three days
later, on August 31, 2007, we acquired Desktop Interactive, Inc.
(“Desktop”).  On June 25, 2008, we changed our name to interCLICK,
Inc.





On
January 4, 2008, we acquired Options Newsletter, Inc., a privately-held Delaware
corporation primarily engaged in the email service provider business. On June
23, 2008, we sold the Options Newsletter business to Options Media Group
Holdings, Inc. (“OPMG”).





Intellectual
Property




We
currently rely on a combination of copyright, trademark and trade secret laws
and restrictions on disclosure to protect our intellectual property
rights.  We enter into proprietary information and confidentiality
agreements with our employees, consultants and commercial partners and control
access to, and distribution of, our software documentation and other proprietary
information.


4





Headed by
our Chief Technology Officer, we employ a team of more than 20 experienced
technology specialists in our South Florida office.  Our technology
and product management teams have developed a new state-of-the-art technology
platform called OSM that we believe is the first data enrichment solution
designed to help advertisers and agencies operationalize data effectively—to
discover which facts drive optimal campaign performance, create more valuable
audiences from those facts, and connect to those audiences at unprecedented
scale.  This new solution is an enhancement to our current technology
platform which is a leading solution providing advanced behavioral targeting and
transparency.





We are
now demonstrating our new OSM technology platform, and have been receiving
positive feedback from our clients.  To continue further enhancing our
platform and market our technology solutions, we plan to spend approximately $4
million in 2010 in compensation and employee-related costs for the approximately
two dozen full-time equivalent employees focused on innovation-related efforts
in 2010, including development of OSM.





Item
1A.        Risk Factors.





Not
applicable to smaller reporting companies.  See Item 7 for the principal
risk factors facing interCLICK.





Item 1B.    
   Unresolved
Staff Comments.




None.




Item
2.           Properties.





Our
principal executive offices are located in a leased facility in New York, New
York, consisting of approximately 5,786 square feet of office space under a
lease that expires in December 2014.  This facility accommodates our
principal sales, marketing, operations, finance and administrative
activities.  Because of our rapid growth, we expect to move into new
executive offices, consisting of 16,840 square feet, by the end of April 2010
and have an agreement to sublet our current executive offices.  Our
technology offices are located in Boca Raton, Florida, consisting of
approximately 7,810 square feet of office space under a lease that expires in
February 2015.  We also lease sales offices in Chicago, Illinois
(1,269 square feet), San Francisco, California (1,324 square feet), and Los
Angeles, California (under 1,000 square feet).  Except for our current
executive offices, we believe that our current facilities are sufficient for our
current needs.  We intend to add new facilities and expand our
existing facilities as we add employees and expand our markets, and we believe
that suitable additional or substitute space will be available as needed to
accommodate any such expansion of our operations.




Item
3.           Legal
Proceedings.





From
time to time, we may become involved in legal proceedings and claims arising in
the ordinary course of our business.  We are not currently a party to
any material litigation.





Item
4.           (Removed and
Reserved).


5





PART
II




Item 5.
            Market for Registrant’s Common
      Equity, Related Stockholder Matters and Issuer Purchases of Equity
      Securities.




Since
November 5, 2009, our common stock has been listed on the NASDAQ Capital Market
under the symbol “ICLK”.  Prior to being listed, our common stock
was quoted on the Over-the-Counter Bulletin Board.





The last
reported sale price of our common stock as reported by NASDAQ on March 26, 2010
was $3.72.  As of that date, there were 60 record
holders.





The
following table provides the high and low bid price information for our common
stock for the periods our stock was quoted on the Bulletin Board and the high
and low sales prices for the periods our stock has been listed on
NASDAQ.  For the period our stock was quoted on the Bulletin Board,
the prices reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions.




Year
                        
                        Quarter Ended
                        
                        Prices(1)High
                        
                        
                        Low2009
                        
                        March
      31
                        
                        $
                        2.10
                        
                        
                        $
                        1.10June
      30
                        
                        $
                        2.70
                        
                        
                        $
                        1.20September
      30
                        
                        $
                        4.50
                        
                        
                        $
                        2.20December
      31
                        
                        $
                        6.00
                        
                        
                        $
                        4.002008
                        
                        March 31
                        
                        $
                        12.50
                        
                        
                        $
                        7.12June 30
                        
                        $
                        7.60
                        
                        
                        $
                        5.20September 30
                        
                        $
                        6.98
                        
                        
                        $
                        2.24December 31
                        
                        $
                        3.84
                        
                        
                        $
                        0.90





(1)
            On
      October 23, 2009, we completed a 1-for-2 reverse stock
      split.  All prices in the table have been adjusted for the
      reverse split.





Dividend
Policy





We have
not paid cash dividends on our common stock and do not plan to pay such
dividends in the foreseeable future.  Our Board of Directors will
determine our future dividend policy on the basis of many factors, including
results of operations, capital requirements, and general business
conditions.





Recent
Sales of Unregistered Securities





In
addition to those unregistered securities previously disclosed in reports filed
with the Securities and Exchange Commission (“SEC”), we have sold securities
without registration under the Securities Act of 1933 (the “Securities Act”) in
reliance upon the exemption provided in Section 4(2) and Rule 506
thereunder as described below.  All numbers have been adjusted to give
effect to a one-for-two reverse stock split effective October 23,
2009.




Name
              
              Date Sold
              
              No. of
                Securities
              
              Reason for IssuanceConsultant
              
              October
      7, 2009
              
              
              150,000
      three-year warrantsexercisable at $4.24 per share
              
              ServicesConsultant
              
              December
      24, 2009
              
              
              2,500
      shares of common stock
              
              Services




6





Item
6.           Selected Financial
Data.




Not
required for smaller reporting companies.


Item 7.
              Management’s Discussion and Analysis of
      Financial Condition and Results of
  Operations.




The
following discussion and analysis should be read in conjunction with our
consolidated financial statements and related notes appearing elsewhere in this
report on Form 10-K. 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” at the end of this Item
7 in this report.





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 before interest, taxes, depreciation and amortization,
including stock-based compensation.  EBITDA should be viewed as
supplemental to, and not as an alternative for, net income or loss, income or
loss from operations or any other measure for determining operating
performance or liquidity, as determined under GAAP. We have included a
reconciliation of our non-GAAP financial measure to net income. See page 10 of
this report.





EBITDA is
used by our management as an additional measure of our performance for purposes
of business decision-making, including developing budgets and managing
expenditures. Period-to-period comparisons of EBITDA helps our management
identify additional trends in our financial results that may not be shown solely
by period-to-period comparisons of income or loss, or income or loss from
operations. Our management recognizes that EBITDA has inherent limitations
because of the excluded items, particularly those items that are recurring in
nature.




We
believe that the presentation of EBITDA is useful to investors in their analysis
of our results for reasons similar to the reasons why our management finds it
useful and because it helps facilitate investor understanding of decisions made
by our management in light of the performance metrics used in making those
decisions. In addition, we believe that providing EBITDA, together with a
reconciliation to GAAP, helps investors make comparisons between interCLICK and
other companies. In making any comparisons to other companies, investors need to
be aware that companies use different non-GAAP measures to evaluate their
financial performance. Investors should pay close attention to the specific
definition being used and to the reconciliation between such measure and the
corresponding GAAP measure provided by each company under applicable SEC
rules.





Company Overview





interCLICK
is a next-generation online display advertising network that combines complete
data and inventory transparency with best in breed targeting solutions. We
generate our revenue through the sale of online display advertising which is
placed on third-party publisher websites.





Significant
events which have affected our results of operations include:





·
            2009
      revenues of $55,258,703 increased by 146% compared to 2008 revenues of
      $22,452,333;


·
            2009
      gross profit margins were 45.6% as compared to 30.4% for
    2008;


·
            Headcount
      increased to 78 people at December 31, 2009, from 37 people at December
      31, 2008;


·
            2009
      EBITDA was $4,612,738, compared to an EBITDA loss of $(3,987,390) in
      2008;


·
            We
      achieved positive EBITDA for five straight quarters beginning with the
      fourth quarter of 2008;


·
            2009
      net income was $501,831 or $0.03 per share (basic) and $0.02 per
      share (diluted), compared to a net loss of $(12,025,539), or ($0.65)
      per share for 2008; and


·
            We
      increased our credit line to $7,000,000 from $5.5 million in September
      2009 to support the growth of our
business.





Results
of Operations





The
following table presents our results of operations for the years ended December
31, 2009 and 2008. It should be noted that our results of operations and our
liquidity and capital resources discussions focus primarily on the operations of
interCLICK while referring to Options Acquisition as a discontinued
operation.  The following discussion of our costs reflects the
reclassification of our expense categories we implemented with the third quarter
of 2009; all prior periods have been retroactively adjusted.


7





For the Year
                      Ended
                      December 31,
                      2009
                    
                    
                    For the Year
                      Ended
                      December 31,
                      2008Revenues
                    
                    $
                    55,258,703
                    
                    
                    $
                    22,452,333Cost
      of revenues
                    
                    
                    30,072,627
                    
                    
                    
                    15,634,096Gross
      profit
                    
                    
                    25,186,076
                    
                    
                    
                    6,818,237Operating
      expenses:Sales
      and marketing
                    
                    
                    8,748,503
                    
                    
                    
                    3,394,753General
      and administrative
                    
                    
                    12,296,404
                    
                    
                    
                    8,351,612Technology
      support
                    
                    
                    3,237,528
                    
                    
                    
                    1,245,942Amortization
      of intangible assets
                    
                    
                    188,780
                    
                    
                    
                    418,508Total
      operating expenses
                    
                    
                    24,471,215
                    
                    
                    
                    13,410,815Operating
      income (loss) from continuing operations
                    
                    
                    714,861
                    
                    
                    
                    (6,592,578
                    )Other
      income (expense):Interest
      income
                    
                    
                    1,053
                    
                    
                    
                    17,095Loss
      on settlement of debt
                    
                    
                    -
                    
                    
                    
                    (20,121
                    )Loss
      on sale of available-for-sale securities
                    
                    
                    (55,233
                    )
                    
                    
                    (116,454
                    )Other
      than temporary impairment of available-for-sale securities
                    
                    
                    (1,042,470
                    )
                    
                    
                    -Loss
      on disposal of property and equipment
                    
                    
                    -
                    
                    
                    
                    (13,635
                    )Warrant
      derivative liability expense
                    
                    
                    (665,690
                    )
                    
                    
                    -Interest
      expense (including amortization of debt discount)
                    
                    
                    (589,624
                    )
                    
                    
                    (1,526,298
                    )Total
      other expense
                    
                    
                    (2,351,964
                    )
                    
                    
                    (1,659,413
                    )Loss
      from continuing operations before income taxes
                    
                    
                    (1,637,103
                    )
                    
                    
                    (8,251,991
                    )Income
      tax benefit
                    
                    
                    2,139,640
                    
                    
                    
                    1,687,305Equity
      in investee's loss, net of taxes
                    
                    
                    -
                    
                    
                    
                    (653,231
                    )Income
      (loss) from continuing operations
                    
                    
                    502,537
                    
                    
                    
                    (7,217,917
                    )Discontinued
      operations:Loss
      from discontinued operations, net of tax
                    
                    
                    -
                    
                    
                    
                    (1,235,940
                    )Loss
      on sale of discontinued operations, net of tax
                    
                    
                    (706
                    )
                    
                    
                    (3,571,682
                    )Loss
      from discontinued operations
                    
                    
                    (706
                    )
                    
                    
                    (4,807,622
                    )Net
      income (loss)
                    
                    
                    501,831
                    
                    
                    
                    (12,025,539
                    )Other
      comprehensive income (loss):Unrealized
      gains (losses) on securities:Unrealized
      loss on available-for-sale-securities, net of tax
                    
                    
                    (899,999
                    )
                    
                    
                    (314,158
                    )Reclassification
      adjustments for losses included in net income (loss), net of
      tax
                    
                    
                    1,097,703
                    
                    
                    
                    116,454Total
      other comprehensive income (loss), net of income taxes
                    
                    
                    197,704
                    
                    
                    
                    (197,704
                    )Comprehensive
      income (loss)
                    
                    $
                    699,535
                    
                    
                    $
                    (12,223,243
                    )Basic
      earnings (loss) per share:Continuing
      operations
                    
                    $
                    0.03
                    
                    
                    $
                    (0.39
                    )Discontinued
      operations
                    
                    $
                    -
                    
                    
                    $
                    (0.26
                    )Net
      income (loss)
                    
                    $
                    0.03
                    
                    
                    $
                    (0.65
                    )Diluted
      earnings (loss) per share:Continuing
      operations
                    
                    $
                    0.02
                    
                    
                    $
                    (0.39
                    )Discontinued
      operations
                    
                    $
                    -
                    
                    
                    $
                    (0.26
                    )Net
      income (loss)
                    
                    $
                    0.02
                    
                    
                    $
                    (0.65
                    )Weighted
      average shares:Basic
                    
                    
                    19,950,379
                    
                    
                    
                    18,568,951Diluted
                    
                    
                    20,953,862
                    
                    
                    
                    18,568,951
  8





Year
Ended December 31, 2009 Compared with Year Ended December 31, 2008




Unless
otherwise indicated, the following discussion relates to our continuing
operations and does not include the operations of Options Acquisition which we
sold in 2008.  We acquired that business in January 2008 and sold it
in June 2008 resulting in a net loss on sale of $3,571,682, net of income
taxes.




Revenues




Revenues
for the year ended December 31, 2009 increased to $55,258,703 from $22,452,333
for the year ended December 31, 2008, an increase of 146%.  The
increase is primarily attributable to growth of our advertiser base through our
expanded national sales force and through budget increases among existing
advertisers.





interCLICK
is particularly sensitive to seasonality given that the majority of its revenues
are tied to CPM (cost-per-thousand) campaigns, which are strongest in the fourth
quarter and weakest in the first quarter.  Despite the continued weakness
of the broader economy in 2008 and 2009, the overall U.S. Internet audience
based on comScore data expanded to 201,689,065 average monthly viewers in the
fourth quarter of 2009, an increase of 5.8%, as compared to the fourth quarter
of 2008.  For the same period indicated, interCLICK experienced average
monthly viewers growth of 6.0%, while revenues grew by 158%.





Given the continued overall growth in online
advertising, coupled with other strategic initiatives undertaken by interCLICK,
including the continued enhancement of our technology 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.




Revenues
from branded advertisers account for the substantial majority of our
revenues.  During the year ended December 31, 2009, revenues from such
advertisers accounted for more than 95% of revenues.




Cost
of Revenues and Gross Profit




Cost of
revenues for the year ended December 31, 2009 increased to $30,072,627 from
$15,634,096 for the year ended December 31, 2008, an increase of
92.4%.  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 54.4% of revenues for
the year ended December 31, 2009 compared to 69.6% of revenues for the year
ended December 31, 2008. The decrease is primarily attributable to: (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 our proprietary technology
platform.





Gross
profit for the year ended December 31, 2009 increased to $25,186,076 from
$6,818,237 for the year ended December 31, 2008, an increase of 269%.  Our
gross margin was 45.6% for the year ended December 31, 2009 compared to
30.4% for the year ended December 31, 2008.  While we expect gross
profit to increase year-over-year in 2010, we expect gross margins will remain
relatively consistent 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 year ended
December 31, 2009 increased to $24,471,215 from $13,410,815 for the year ended
December 31, 2008, an increase of 82.5%.  The increase is primarily
attributable to headcount expansion at year end from 37 employees to 78
employees.  We expect to hire up to 50 new employees in 2010
to support the growth of our business and the ongoing innovation, development
and marketing of OSM.  Approximately two dozen of our employees, for a
total cost of approximately $4 million, will be spending the majority of their
time on OSM in 2010.  Furthermore, we anticipate stock-based
compensation expense of approximately $4 million in 2010.





General and Administrative





General
and administrative expenses consist primarily of executive, administrative,
operations and product support compensation (including non-cash stock based
compensation), facilities costs, insurance, depreciation, professional fees,
investor relations fees and bad debt expense.  General and
administrative expenses for the year ended December 31, 2009 increased to
$12,296,404 from $8,351,612 for the year ended December 31, 2008, an increase of
47.2%.   General and administrative expenses represented 22.3% of
revenues for the year ended December 31, 2009 compared to 37.2% of revenues for
the year ended December 31, 2008.


9


Sales
and Marketing





Sales and
marketing expenses consist primarily of compensation (including non-cash stock
based compensation) for sales and marketing and related support resources, sales
commissions and trade show expenses. Sales and marketing expenses for the year
ended December 31, 2009 increased to $8,748,503 from $3,394,753 for the year
ended December 31, 2008, an increase of 158%.   The increase is
primarily attributable to our national sales-force expansion.  Sales
and marketing expenses represented 15.8% of revenues for the year ended December
31, 2009 compared to 15.1% of revenues for the year ended December 31,
2008.





Technology
Support





Technology
support consists primarily of compensation (including non-cash stock based
compensation) of technology support and related resources. Technology support
and related resources have been directed primarily towards continued enhancement
of our platform, our development of our new OSM platform, including integration
of third party data providers, upgrades to our advertising serving platform, and
ongoing maintenance and improvement of our technology infrastructure. 
Technology support expenses for the year ended December 31, 2009 increased to
$3,237,528 from $1,245,942 for the year ended December 31, 2008, an increase of
160%. The increase is primarily attributable to expenditures necessary to
support interCLICK’s increased business and our development of OSM. Technology
support expenses represented 5.9% of revenues for the year ended December 31,
2009 compared to 5.5% of revenues for the year ended December 31,
2008.





Amortization
of Intangible Assets





Amortization
of intangible assets includes amortization of customer relationships, developed
technology and a domain name acquired through the Desktop
acquisition.  Amortization of intangible assets for the year ended
December 31, 2009 decreased to $188,780 from $418,508 for the year ended
December 31, 2008, a decrease of 54.9%.  The decrease is primarily
attributable to the accelerated amortization applicable to acquired customer
relationships in prior periods.  Amortization of
intangible assets represented 0.3% of revenues for the year ended December 31,
2009 compared to 1.9% of revenues for the year ended December 31,
2008.





Net
Income (Loss)





Net
income for the year ended December 31, 2009 was $501,831 compared to a net loss
of $(12,025,539) for the year ended December 31, 2008.  The change was
attributable to strong revenue and gross profit growth, partially offset by
higher operating expenses which grew at a slower pace than
revenue.  Furthermore, the 2008 comparable period loss included a loss
from discontinued operations, net of income taxes, of $(4,807,622), and equity
in investee’s loss, net of income taxes, of $(653,231).




Reconciliations
of Certain Non-GAAP Measures





For
      the Year
                              Ended
                              December
      31,
                              2009
                            
                            
                            For
      the Year
                              Ended
                              December
      31,
                              2008GAAP
      net income (loss)
                            
                            $
                            501,831
                            
                            
                            $
                            (12,025,539
                            )Loss
      from sale of discontinued operations, net of tax
                            
                            
                            706
                            
                            
                            
                            3,571,682Loss
      from discontinued operations, net of tax
                            
                            
                            -
                            
                            
                            
                            1,235,940GAAP
      income (loss) from continuing operations
                            
                            
                            502,537
                            
                            
                            
                            (7,217,917
                            )Income
      tax benefit
                            
                            
                            (2,139,640
                            )
                            
                            
                            (1,687,305
                            )Equity
      in investee's loss, net of taxes
                            
                            
                            -
                            
                            
                            
                            653,231GAAP
      Loss from continuting operations before income taxes
                            
                            
                            (1,637,103
                            )
                            
                            
                            (8,251,991
                            )Interest
      expense
                            
                            
                            589,624
                            
                            
                            
                            1,526,298Interest
      income
                            
                            
                            (1,053
                            )
                            
                            
                            (17,095
                            )Loss
      on change in warrant derivative liability
                            
                            
                            665,690
                            
                            
                            
                            -Loss
      on sale of available-for-sale securities
                            
                            
                            55,233
                            
                            
                            
                            116,454Other
      than temporary impairment of available for sale securities
                            
                            
                            1,042,470
                            
                            
                            
                            -Loss
      on settlement of debt
                            
                            
                            -
                            
                            
                            
                            20,121Loss
      on disposal of property and equipment
                            
                            
                            -
                            
                            
                            
                            13,635GAAP
      Operating income (loss) from continuing operations
                            
                            
                            714,861
                            
                            
                            
                            (6,592,578
                            )Stock-based
      compensation
                            
                            
                            3,394,299
                            
                            
                            
                            1,941,191Amortization
      of intangible assets
                            
                            
                            188,780
                            
                            
                            
                            418,508Depreciation
                            
                            
                            314,798
                            
                            
                            
                            245,489EBITDA
                            
                            $
                            4,612,738
                            
                            
                            $
                            (3,987,390
                            )


10





Liquidity and Capital Resources





Net cash
used in operating activities during the year ended December 31, 2009 totaled
$3,099,810 and resulted primarily from an increase in accounts receivable of
$14,704,746 and deferred tax assets of $2,654,946, partially offset by net
income of $501,831, stock-based compensation of $3,394,299, other than temporary
impairment of available-for-sale securities of $1,042,470, and increases in
accounts payable of $5,645,429 and accrued expenses of $2,843,387.





Net cash
used in investing activities during the year ended December 31, 2009 totaled
$181,384 and resulted from $215,777 of purchases of property and equipment,
offset by proceeds from the sale of OPMG stock of $34,393.





Net cash
provided by financing activities during the year ended December 31, 2009 was
$16,001,281 and resulted primarily from proceeds of $13,776,670 from sales of
common stock and warrants (net of offering expenses), and $1,657,947 received
under our credit facility (net of repayments), and excess tax benefits from
stock-based compensation of $879,579, partially offset primarily by the
repayment of $400,000 of notes payable.




On
November 13, 2008, interCLICK entered into a revolving credit facility with
Crestmark Commercial Capital Lending, LLC to finance certain eligible accounts
receivables of interCLICK in an amount up to $3.5 million (subsequently
increased to $4.5 million on February 3, 2009, increased to $5.5 million on
April 30, 2009, and increased to $7.0 million on September 2,
2009).  The line of credit expires on May 12, 2010 and is secured by
substantially all of the assets of interCLICK, except property and equipment
financed elsewhere.





At
December 31, 2009, interCLICK had working capital of $16,550,958, including
$12,653,958 in cash and cash equivalents.  As of March 29, 2010,
interCLICK had approximately $9,200,000 of cash and cash
equivalents.  As our business has expanded, interCLICK has had
positive EBITDA for the last five quarters. We discuss this non GAAP
financial measure and its limitations under Company Overview
above. interCLICK continues to expand and had very strong year-over-year
revenue growth in each quarter of 2009.  Management anticipates that
revenues will continue to increase through 2010.  In addition to our
cash and cash equivalents, the unused amount under the Crestmark line of credit
available was approximately $6,000,000 at March 29, 2010.  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
2009, we acquired $706,784 in capital assets, including $491,007 through
conventional capital leases to further enhance the features and scale of our
technology assets, which is necessary both to support the realization of
growth objectives as well as to advance interCLICK’s present competitive
position.  During 2010, we expect to acquire approximately $1,500,000
in capital assets, the majority of which will be obtained in the first quarter
and financed through capital leases.





Related
Party Transactions





No
related party transactions had a material impact on our operating
results.  See Notes 7 and 14 to our consolidated financial
statements.





New
Accounting Pronouncements





See Note
2 to our consolidated financial statements included in this report for
discussion of recent accounting pronouncements.




Critical
Accounting Estimates





Management’s
discussion and analysis of financial condition and results of operations is
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these consolidated financial statements requires us
to make estimates and assumptions that affect the reported amounts of assets,
liabilities, revenues, and expenses, and related disclosure of contingent assets
and liabilities. On an ongoing basis, we evaluate our estimates and assumptions,
including, but not limited to, those related to the valuation of accounts
receivable and allowance for doubtful accounts, purchase price fair value
allocation for business combinations, estimates of depreciable lives and
valuation of property and equipment, valuation and amortization periods of
intangible assets and deferred costs, valuation of goodwill, valuation of
discounts on debt, valuation of derivatives, valuation of investment in
available-for-sale securities, valuation of common shares, options and warrants
granted for services or recorded as debt discounts or other non-cash purposes
including business combinations, the valuation allowance on deferred tax assets,
estimates of the tax effects of business combinations and sale of subsidiary,
and estimates in equity investee’s losses. We base our estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates and assumptions.


11





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.  See Note 2 to the consolidated financial
statements.





With
the recent economic recession, management is particularly attentive to the
length account receivable collection cycles and the attendant possibility of an
increase in bad debts.  However, as collection performance improved
during 2009, management reduced bad debt reserves at December 31, 2009, to
$383,188 or 1.7% of gross accounts receivable, as compared to $425,000, or 5.6%
of gross accounts receivable, as of December 31, 2008.





Management
is sensitive to the carrying value of the 7,156,085 OPMG shares held on the
balance sheet at $715,608 at December 31, 2009. These shares are valued
based on a private transaction in November 2009, rather than the quoted market
price.  Historically, management has found that private transactions
are among the most economically feasible ways to sell any portion of the
Company’s investment in OPMG.  In the future, we may attempt to sell
some OPMG shares in the open market which could materially reduce the carrying
value of our investment.  See Notes 6 and 11 to the
consolidated financial statements.





Forward-Looking
Statements





This
report contains forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 including those relating to our
liquidity, our belief that we have sufficient cash and borrowing capacity to
meet our working capital needs for the next 12 months, our expectations
regarding gross profit, gross margins, capital expenditures, our expectations
regarding increasing our headcount and sales force, our expectations regarding
stock-based compensation expense and our belief that our software permits
advertisers to obtain more value.  Additionally, words such as
“expects,” “anticipates,” “intends,” “believes,” “will” and similar words are
used to identify forward-looking statements.





Some or
all of the results anticipated by these forward-looking statements may not
occur.  Important factors, uncertainties and risks that may cause
actual results to differ materially from these forward-looking statements
include, but are not limited to, the Risk Factors which follow, the impact of
intense competition, the continuation or worsening of current economic
conditions, a potential decrease in corporate advertising spending, a potential
decrease in consumer spending and the condition of the domestic and global
credit and capital markets. Additionally, these forward-looking statements are
presented as of the date this Form 10-K is filed with the Securities and
Exchange Commission. We do not intend to update any of these forward-looking
statements.





RISK
FACTORS





There
are numerous and varied risks, known and unknown, that may prevent us from
achieving our goals.  If any of these risks actually occur, our
business, financial condition or results of operations may be materially
adversely affected.  In such case, the trading price of our common
stock could decline and investors could lose all or part of their
investment.





Risks
Relating to the Company





Because
we have a limited operating history to evaluate our company, the likelihood of
our success must be considered in light of the problems, expenses, difficulties,
complications and delay frequently encountered by an early-stage
company.





Since we
have a limited operating history it will make it difficult for investors and
securities analysts to evaluate our business and prospects.  You must
consider our prospects in light of the risks, expenses and difficulties we face
as an early stage company with a limited operating history.  Investors
should evaluate an investment in our company in light of the uncertainties
encountered by early-stage companies in an intensely competitive
industry.  There can be no assurance that our efforts will be
successful or that we will be able to maintain profitability.





If
we cannot manage our growth effectively, we may not maintain
profitability.





Businesses
which grow rapidly often have difficulty managing their growth.  If
our business continues to grow as rapidly as we have since August 2007 and as we
anticipate, we will need to expand our management by recruiting and employing
experienced executives and key employees capable of providing the necessary
support.





We cannot
assure you that our management will be able to manage our growth effectively or
successfully.  Our failure to meet these challenges could cause us to
lose money, which will reduce our stock price.


12





Because
of the severity of the global economic recession, our customers may delay in
paying us or not pay us at all.  This would have a material and
adverse effect on our future operating results and financial
condition.





One of
the effects of the severe global economic recession is that businesses are
tending to maintain their cash resources and delay in paying their creditors
whenever possible.  As a trade creditor, we lack leverage unlike
secured lenders and providers of essential services.  Should the
economy further deteriorate, we may find that either advertisers, their
representative agencies or both may delay in paying us.  Additionally,
we may find that advertisers will reduce Internet advertising which would reduce
our future revenues.  These events would result in a number of adverse
effects upon us including increasing our borrowing costs, reducing our gross
profit margins, reducing our ability to borrow under our line of credit, and
reducing our ability to grow our business.  These events would have a
material and adverse effect upon us.





Because
we expect to need additional capital to fund our growing operations, we may not
be able to obtain sufficient capital and may be forced to limit the scope of our
operations.





We expect
that as our business continues to grow we will need additional working capital.
In addition to the proceeds we received from our 2009 registered public
offering, we have available $7,000,000 accounts receivable factoring line of
credit with a commercial lender which expires in May 2010.  We are currently
evaluating our options with respect to extending this line of credit on similar
terms with this lender or obtaining a new line of credit elsewhere.This lender is
privately-held and we have no access to any information about its financial
condition.  Because of the severe impact that the recession has had on
the financial services sector, we may be adversely affected in our ability to
draw on our line of credit, replace this line of credit or increase the amount
we can borrow.  The slowdown in the global economy and the freezing of
the credit markets may adversely affect our ability to raise
capital.  If adequate additional debt and/or equity financing is not
available on reasonable terms or at all, we may not be able to continue to
expand our business, and we will have to modify our business plans
accordingly.  These factors would have a material and adverse effect
on our future operating results and our financial condition.





Even if
we secure additional working capital, we may not be able to negotiate terms and
conditions for receiving the additional capital that are acceptable to
us.  Any future equity capital financings will dilute existing
shareholders.  In addition, new equity or convertible debt securities
issued by us to obtain financing could have rights, preferences and privileges
senior to our common stock.  We cannot give you any assurance that any
additional financing will be available to us, or if available, will be on terms
favorable to us.





If
advertising on the Internet loses its appeal, our revenue could
decline.





Our
business model may not continue to be effective in the future for a number of
reasons, including the following: click and conversion rates have always been
low and may decline as the number of advertisements and ad formats on the
Internet increases; companies may prefer other forms of Internet advertising we
do not offer, including certain forms of search engine placements; companies may
reject or discontinue the use of certain forms of online promotions that may
conflict with their brand objectives; companies may not utilize online
advertising due to concerns of "click-fraud", particularly related to search
engine placements; regulatory actions may negatively impact certain business
practices that we currently rely on to generate a portion of our revenue and
profitability; and, perceived lead quality may diminish.  If the
number of companies who purchase online advertising from us does not continue to
grow, we may experience difficulty in attracting publishers, and our revenue
could decline.





If we fail to
manage our supply of display advertising impressions (also referred to as
“publishing inventory”) and third party data partnerships effectively, our
profit margins could decline and should we fail to acquire additional publishing
inventory our growth could be impeded.





Our
success depends in part on our ability to manage our existing publishing
inventory and third party data partnerships effectively.  Our
publishers are not bound by long-term contracts that ensure us a consistent
supply of display advertising space, which we refer to as
inventory.  In addition, publishers can change the amount of inventory
they make available to us at any time.  If a publisher decides not to
make publishing inventory from its websites available to us, we may not be able
to replace this inventory with that from other publishers with comparable
traffic patterns and user demographics quickly enough to fulfill our
advertisers’ requests, thus resulting in potentially lost
revenues.  Additionally, if a third-party data provider stopped
offering their data to us, we may not be able to replace this data with another
data provider of equal or better effectiveness.  Our ability to
maintain our existing data partnerships, as well as attract new data partners,
will depend on various factors, some of which are beyond our
control.





We expect
that our advertiser customers’ requirements will become more sophisticated as
the Internet continues to mature as an advertising medium.  If we fail
to manage our existing publisher inventory effectively to meet our advertiser
customers’ changing requirements, our revenues could decline.  Our
growth depends on our ability to expand our publisher inventory.  To
attract new customers, we must maintain a consistent supply of attractive
publisher inventory.  We intend to expand our inventory by selectively
adding to our network new publishers that offer attractive demographics,
innovative and quality content and growing web user traffic.  Our
ability both to retain current as well as to attract new publishers to our
network will depend on various factors, some of which are beyond our
control.  These factors include, but are not limited to: our ability
to introduce new and innovative services, our efficiency in managing our
existing publisher inventory and our pricing policies.  We cannot
assure you that the size of our publisher inventory will increase or remain
constant in the future.


13





If
the technology that we currently use to target the delivery of online
advertisements and to prevent fraud on our network is restricted or becomes
subject to regulation, our expenses could increase and we could lose customers
or advertising inventory.





The FTC
has issued guidelines recommending that Internet advertising firms that engage
in behavioral targeting implement industry-wide self-regulation in order to
protect the privacy of consumers who use the Internet.  If
notwithstanding this report, the FTC were in the future to issue regulations, it
may adversely affect what we perceive to be a competitive
advantage.  This could increase our costs and reduce our future
revenues.





If
we make acquisitions, it could divert management’s attention, cause ownership
dilution to our shareholders and be difficult to integrate.





Following
our acquisition of Desktop in August 2007, we have grown rapidly.  We
expect to continue to evaluate and consider future
acquisitions.  Acquisitions generally involve significant risks,
including difficulties in the assimilation of operations, services,
technologies, and corporate culture of the acquired companies, diversion of
management's attention from other business concerns, overvaluation of the
acquired companies, and the acceptance of the acquired companies’ products and
services by our customers.  Acquisitions may not be successful, which
can have a number of adverse effects upon us including adverse financial effects
and may seriously disrupt our management’s time.  The integration of
our acquired operations, products and personnel may place a significant burden
on management and our internal resources.  The diversion of management
attention and any difficulties encountered in the integration process could harm
our business.





It
may be difficult to predict our financial performance because our quarterly
operating results may fluctuate.





Our
revenues, operating results and valuations of certain assets and liabilities may
vary significantly from quarter to quarter due to a variety of factors, many of
which are beyond our control.  You should not rely on period-to-period
comparisons of our results of operations as an indication of our future
performance.  Our results of operations may fall below the
expectations of market analysts and our own forecasts.  If this
happens, the market price of our common stock may fall
significantly.  The factors that may affect our quarterly operating
results and valuations of certain assets and liabilities include the
following:





•
            fluctuations in demand for our
      advertising solutions or changes in customer
    contracts;





•
            fluctuations in the amount of
      available advertising space on our
  network;




•
            the timing and amount of sales
      and marketing expenses incurred to attract new
      advertisers;





•
            the impact of our recent
      substantial increase in headcount to meet expected increases in revenue
      for 2010;





•
            fluctuations in our average ad
      rates (i.e., the amount of advertising sold at higher rates rather than
      lower rates);





•
            fluctuations in the cost of
      online advertising and in the cost and/or amount of data available for
      behavioral targeting
campaigns;





•
            seasonal patterns in Internet
      advertisers’ spending;





•
                worsening
      economic conditions which cause advertisers to reduce Internet spending
      and consumers to reduce their purchases;•
                increases
      in our investment in new
technology;





•
            changes in the regulatory
      environment, including regulation of advertising or the Internet, that may
      negatively impact our marketing
  practices;





•
            the timing and amount of expenses
      associated with litigation, regulatory investigations or restructuring
      activities, including settlement costs and regulatory penalties assessed
      related to government enforcement
  actions;




•
                any
      changes we make in our Critical Accounting Estimates described in
      Management’s Discussion and Analysis of Financial Condition and Results of
      Operations in this report;•
                the
      valuation of available-for-sale securities may deteriorate
    further;




•
            the adoption of new accounting
      pronouncements, or new interpretations of existing accounting
      pronouncements, that impact the manner in which we account for, measure or
      disclose our results of operations, financial position or other financial
      measures; and





•
            costs related to acquisitions of
      technologies or businesses.





Expenditures
by advertisers also tend to be cyclical, reflecting overall economic conditions
as well as budgeting and buying patterns.  Any decline in the economic
prospects of advertisers or the economy generally may alter advertisers’ current
or prospective spending priorities, or may increase the time it takes us to
close sales with advertisers, and could materially and adversely affect our
business, results of operations and financial condition.


14





If
we fail to retain our key personnel, we may not be able to achieve our
anticipated level of growth and our business could suffer.





Our
future depends, in part, on our ability to attract and retain key personnel and
the continued contributions of our executive officers, each of whom may be
difficult to replace. In particular, Michael Mathews, Chief Executive Officer,
Michael Katz, President, Andrew Katz, Chief Technology Officer, Roger Clark,
Chief Financial Officer, Jason Lynn, Chief Strategy Officer, and Dave Myers,
Executive Vice President of Operations are important to the management of our
business and operations and the development of our strategic
direction.  The loss of the services of Messrs. Mathews, Michael Katz,
Andrew Katz, Clark, Lynn and Myers and the process to replace any key personnel
would involve significant time and expense and may significantly delay or
prevent the achievement of our business objectives.





Our
two largest shareholders may be able to exert significant control over our
business and affairs and may have actual or potential interests that may depart
from those of our other shareholders.





Our
Co-Chairmen of the Board own a substantial number of shares of our common
stock.  The interests of such persons may differ from the interests of
other shareholders.  As a result, in addition to their positions with
us, such persons may be able to have significant influence over all corporate
actions requiring shareholder approval, irrespective of how our other
shareholders may vote, including their ability to:





•
            elect or defeat the election of
      our directors;





•
            amend or prevent amendment of our
      certificate of incorporation or
bylaws;





•
            effect or prevent a merger, sale
      of assets or other corporate transaction;
  and





•
            control the outcome of any other
      matter submitted to the shareholders for
  vote.





Their
power to control the designation of directors gives them the ability to exert
influence over day-to-day operations. In
addition, such persons’ stock ownership may discourage a potential acquirer from
making a tender offer or otherwise attempting to obtain control of us, which in
turn could reduce our stock price or prevent our shareholders from realizing a
premium over our stock price.




Because
government regulation of the Internet may subject us to additional operating
restrictions and regulations, our business and operating results may be
adversely affected.




Companies
engaging in online search, commerce and related businesses face uncertainty
related to future government regulation of the Internet.  Due to the
rapid growth and widespread use of the Internet, federal and state governments
are enacting and considering various laws and regulations relating to the
Internet.  Furthermore, the application of existing laws and
regulations to Internet companies remains somewhat unclear.  Our
business and operating results may be negatively affected by new laws, and such
existing or new regulations may expose us to substantial compliance costs and
liabilities and may impede the growth in use of the Internet. 
Additionally, our third party data partners may be adversely affected by any new
or existing laws.




The
application of these statutes and others to the Internet search industry is not
entirely settled.  Further, several existing and proposed federal laws
could have an impact on our business and our third party data partners’
business:




• The
Digital Millennium Copyright Act and its related safe harbors, are intended to
reduce the liability of online service providers for listing or linking to
third-party websites that include materials that infringe copyrights or other
rights of others.




• The
CAN-SPAM Act of 2003 and certain state laws are intended to regulate interstate
commerce by imposing limitations and penalties on the transmission of
unsolicited commercial electronic mail via the Internet.




• There
have been several bills introduced in the Congress in recent years relating to
protecting privacy.  As with any change in Presidential
administration, especially to one more likely to protect privacy, new
legislation in this area may be enacted.




• Adopted
and pending consumer protection and privacy legislation, including the FTC
Online Behavioral Advertising Principles referred to in a prior risk
factor.




With
respect to the subject matter of each of these laws, courts may apply these laws
in unintended and unexpected ways.As a company that
provides services over the Internet, we may be subject to an action brought
under any of these or future laws governing online services.  We may
also be subject to costs and liabilities with respect to privacy issues. 
Several Internet companies have incurred costs and paid penalties for violating
their privacy policies.  Further, it is anticipated that new legislation
may be adopted by federal and state governments with respect to user
privacy.  Additionally, foreign governments may pass laws which could
negatively impact our business or may prosecute us for our products and services
based upon existing laws.  The restrictions imposed by and cost of
complying with, current and possible future laws and regulations related to our
business could harm our business and operating results.Further, any such laws
that affect our third party data partners could indirectly harm our business and
operating results.


15





If
we are subject to legal claims, and/or government enforcement actions and held
liable for our or our customers’ failure to comply with federal, state and
foreign laws, regulations or policies governing consumer privacy, it could
materially harm our business and damage our reputation.





Recent
growing public concern regarding privacy and the collection, distribution and
use of information about Internet users has led to increased federal, state and
foreign scrutiny and legislative and regulatory activity concerning data
collection and use practices.  The United States Congress currently
has pending legislation regarding privacy and data security measures (e.g., S.
495, the “Personal Data Privacy and Security Act of 2007”).  Any
failure by us to comply with applicable federal, state and foreign laws and the
requirements of regulatory authorities may result in, among other things,
indemnification liability to our customers and the advertising agencies we work
with, administrative enforcement actions and fines, class action lawsuits, cease
and desist orders, and civil and criminal liability.  Recently, class
action lawsuits have been filed alleging violations of privacy laws by Internet
service providers.  The European Union's directive addressing data
privacy limits our ability to collect and use information regarding Internet
users.  These restrictions may limit our ability to target advertising
in most European countries.  Our failure to comply with these or other
federal, state or foreign laws could result in liability and materially harm our
business.





In
addition to government activity, privacy advocacy groups and the technology and
direct marketing industries are considering various new, additional or different
self-regulatory standards.  This focus, and any legislation,
regulations or standards promulgated, may impact us
adversely.  Governments, trade associations and industry
self-regulatory groups may enact more burdensome laws, regulations and
guidelines, including consumer privacy laws, affecting our customers and
us.  Since many of the proposed laws or regulations are just being
developed, and a consensus on privacy and data usage has not been reached, we
cannot yet determine the impact these proposed laws or regulations may have on
our business.  However, if the gathering of profiling information were
to be curtailed, Internet advertising would be less effective, which would
reduce demand for Internet advertising and harm our business.





Third
parties may bring class action lawsuits against us relating to online privacy
and data collection.  We disclose our information collection and
dissemination policies, and we may be subject to claims if we act or are
perceived to act inconsistently with these published policies.  Any
claims or inquiries could be costly and divert management's attention, and the
outcome of such claims could harm our reputation and our business.





Our
customers are also subject to various federal and state laws concerning the
collection and use of information regarding individuals.  These laws
include the Children's Online Privacy Protection Act, the federal Drivers
Privacy Protection Act of 1994, the privacy provisions of the Gramm-Leach-Bliley
Act, the federal CAN-SPAM Act of 2003, as well as other laws that govern the
collection and use of consumer credit information.  We cannot assure
you that our customers are currently in compliance, or will remain in
compliance, with these laws and their own privacy policies.  We may be
held liable if our customers use our technologies in a manner that is not in
compliance with these laws or their own stated privacy policies.





If
we are not able to protect our intellectual property from unauthorized use, it
could diminish the value of our products and services, weaken our competitive
position and reduce our revenues.





Our
success depends in large part on our proprietary demographic, behavioral,
contextual, geographic and retargeting technologies.  In addition, we
believe that our trademarks are key to identifying and differentiating our
products and services from those of our competitors.  We may be
required to spend significant resources to monitor and police our intellectual
property rights.  If we fail to successfully enforce our intellectual
property rights, the value of our products and services could be diminished and
our competitive position may suffer.





We rely
on a combination of copyright, trademark and trade secret laws, confidentiality
procedures and licensing arrangements to establish and protect our proprietary
rights.  Third-party software providers could copy or otherwise obtain
and use our technologies without authorization or develop similar technologies
independently, which may infringe upon our proprietary rights.  We may
not be able to detect infringement and may lose competitive position in the
market before we do so.  In addition, competitors may design around
our technologies or develop competing technologies.  Intellectual
property protection may also be unavailable or limited in some foreign
countries.





We
generally enter into confidentiality or license agreements with our employees,
consultants, vendors, customers, and corporate partners, and generally control
access to and distribution of our technologies, documentation and other
proprietary information.  Despite these efforts, unauthorized parties
may attempt to disclose, obtain or use our products and services or
technologies.  Our precautions may not prevent misappropriation of our
products, services or technologies, particularly in foreign countries where laws
or law enforcement practices may not protect our proprietary rights as fully as
in the United States.


16





If
we become involved in lawsuits relating to our intellectual property rights, it
could be expensive and time consuming, and an adverse result could result in
significant damages and/or force us to make changes to our
business.





We rely
on trade secrets to protect our intellectual property rights. If we are sued by
a third party which alleges we are violating its intellectual property rights or
if we sue a third party for violating our rights, intellectual property
litigation is very expensive and can divert our limited resources.  We
may not prevail in any litigation.  An adverse determination of any
litigation brought by us could materially and adversely affect our future
results of operations by either reducing future revenues or increasing future
costs.  Additionally, an adverse award of money damages could affect
our financial condition.





Furthermore,
because of the substantial amount of discovery required in connection with
intellectual property litigation, there is a risk that some of our confidential
information could be compromised by disclosure during this type of
litigation.  In addition, during the course of this kind of
litigation, there could be public announcements of the results of hearings,
motions or other interim proceedings or developments in the
litigation.  If securities analysts or investors perceive these
results to be negative, it could have an adverse effect on the trading price of
our common stock.





If
we are not able to respond to the rapid technological change characteristic of
our industry, our services may not be competitive.





The
market for our services is characterized by rapid change in business models and
technological infrastructure, and we will need to constantly adapt to changing
markets and technologies to provide competitive services.  We believe
that our future success will depend, in part, upon our ability to develop our
services for both our target market and for applications in new
markets.  We may not, however, be able to successfully do so, and our
competitors may develop innovations that render our services
uncompetitive.





If
our computer systems fail to operate effectively in the future, we may incur
significant costs to remedy these failures and may sustain reduced
revenues.





Our
success depends on the continuing and uninterrupted performance of our computer
systems. Sustained or repeated system failures that interrupt our ability to
provide services to customers, including failures affecting our ability to
deliver advertisements quickly and accurately and to process visitors’ responses
to advertisements, would reduce significantly the attractiveness of our
solutions to advertisers and publishers.  Our business, results of
operations and financial condition could also be materially and adversely
affected by any systems damage or failure that impacts data integrity or
interrupts or delays our operations.  Our computer systems are
vulnerable to damage from a variety of sources, including telecommunications
failures, power outages and malicious or accidental human acts.  Any
of the above factors could substantially harm our business resulting in
increased costs.  Moreover, despite network security measures, our
servers are potentially vulnerable to physical or electronic break-ins, computer
viruses and similar disruptive problems in part because we cannot control the
maintenance and operation of our third-party data centers.  Any of
these occurrences could cause material interruptions or delays in our business,
result in the loss of data, render us unable to provide services to our
customers, and expose us to material risk of loss or litigation and
liability.  If we fail to address these issues in a timely manner, it
may materially damage our reputation and business causing our revenues to
decline.




Computer
viruses could damage our business.





Computer
viruses, worms and similar programs may cause our systems to incur delays or
other service interruptions and could damage our reputation and ability to
provide our services and expose us to legal liability, all of which could have a
material adverse effect on our business, results of operations, financial
condition and the trading price of our common stock.





Because
our third-party servers are located in South Florida, in the event of a
hurricane our operations could be adversely affected.





We rely
upon servers owned by third parties which are located in South Florida where our
technology offices are located.  Because South Florida is in a
hurricane-sensitive area, we are susceptible to the risk of damage to our
servers.  This damage can interrupt our ability to provide
services.  If damage caused to our servers were to cause them to be
inoperable for any amount of time, we would be forced to switch hosting
facilities which could be more costly.  We are not insured against any
losses or expenses that arise from a disruption or any short-term outages to our
business due to hurricanes or tropical storms.





Since
we rely on third-party co-location providers, a failure of service by these
providers could adversely affect our business and reputation.





We rely
upon third party co-location providers to host our main servers.  In
the event that these providers experience any interruption in operations or
cease operations for any reason or if we are unable to agree on satisfactory
terms for continued hosting relationships, we would be forced to enter into a
relationship with other service providers or assume hosting responsibilities
ourselves.  If we are forced to switch hosting facilities, we may not
be successful in finding an alternative service provider on acceptable terms or
in hosting the computer servers ourselves.  We may also be limited in
our remedies against these providers in the event of a failure of service. In
the past, short-term outages have occurred in the service maintained by
co-location providers which could recur.  We added a fully-redundant
co-location facility in the Washington D.C. area in the first quarter of 2010 to
mitigate the single point of failure risk. We also rely on third-party providers
for components of our technology platform.  A failure or limitation of
service or available capacity by any of these third-party providers could
adversely affect our business and reputation.


17





If
we fail to maintain an effective system of internal controls, we may not be able
to accurately report our financial results or prevent fraud and our business may
be harmed and our stock price may be adversely impacted.





Effective
internal controls are necessary for us to provide reliable financial reports and
to effectively prevent fraud. Any inability to provide reliable financial
reports or to prevent fraud could harm our business.  The
Sarbanes-Oxley Act of 2002 requires management to evaluate and assess the
effectiveness of our internal control over financial reporting.  We
determined that our internal control over financial reporting was effective as
of December 31, 2009.  In order to continue to comply with the
requirements of the Sarbanes-Oxley Act, we are required to continuously evaluate
and, where appropriate, enhance our policies, procedures and internal
controls.  If we fail to maintain the adequacy of our internal
controls, we could be subject to litigation or regulatory scrutiny and investors
could lose confidence in the accuracy and completeness of our financial
reports.  We cannot assure you that in the future we will be able to
fully comply with the requirements of the Sarbanes-Oxley Act or that management
will conclude that our internal control over financial reporting is
effective.  If we fail to fully comply with the requirements of the
Sarbanes-Oxley Act, our business may be harmed and our stock price may
decline.





Risks
Relating to our Common Stock





Due
to factors beyond our control, our stock price may be volatile.





Any of
the following factors could affect the market price of our common
stock:





·
            Actual or anticipated variations
      in our quarterly results of
operations;


·
            Our failure to meet financial
      analysts’ performance
expectations;


·
            Our
      failure to meet or exceed our own publicly-disclosed
      forecasts;


·
            Our failure to achieve and
      maintain profitability;


·
            Short selling
      activities;


·
            The loss of major advertisers,
      publishers or data
providers;


·
            Announcements by us or our
      competitors of significant contracts, new products, acquisitions,
      commercial relationships, joint ventures or capital
      commitments;


·
            The departure of key
      personnel;


·
            Regulatory
      developments;


·
            Changes in market valuations of
      similar companies; or


·
            The sale of a large amount of
      common stock by shareholders owning large
  positions.





In the
past, following periods of volatility in the market price of a company’s
securities, securities class action litigation has often been
instituted.  A securities class action suit against us could result in
substantial costs and divert our management’s time and attention, which would
otherwise be used to benefit our business.





Because the
majority of our outstanding shares are freely tradable, sales of these
shares could cause the market price of our common stock to drop significantly,
even if our business is performing well.





As of
March 29, 2010, we had outstanding 23,694,272 shares of common stock of which
our directors and executive officers own approximately 4.4 million shares which
are subject to the limitations of Rule 144 under the Securities
Act.  Almost all of the remaining outstanding shares are freely
tradable.  The restricted shares, not held by our directors or
executive officers, will be eligible for sale under Rule 144 on various dates
beginning in April 2010 through September 2010.





In
general, Rule 144 provides that any non-affiliate of ours, who has held
restricted common stock for at least six-months, is entitled to sell their
restricted stock freely, provided that we stay current in our filings with the
SEC.





An
affiliate of interCLICK may sell restricted stock after six months or
unrestricted stock with no holding period with the following
limitations:





(i)
            we are current in our SEC
      filings,


(ii)
            certain manner of sale
      provisions,


(iii)
            filing of Form 144,
      and


(iv)
            volume limitations limiting the
      sale of shares within any three-month period to a number of shares that
      does not exceed the greater of 1% of the total number of outstanding
      shares or, the average weekly trading volume during the four calendar
      weeks preceding the filing of a notice of
  sale.





Because the
majority of our outstanding shares are freely tradable and the shares held
by our affiliates may be freely sold (subject to the Rule 144 limitations),
sales of these shares could cause the market price of our common stock to drop
significantly, even if our business is performing well.


18





Delaware law contains anti-takeover
provisions that could deter takeover attempts that could be beneficial to our
stockholders.





Provisions
of Delaware law could make it more difficult for a third-party to acquire us,
even if doing so would be beneficial to our stockholders. Section 203 of the
Delaware General Corporation Law may make the acquisition of the Company and the
removal of incumbent officers and directors more difficult by prohibiting
stockholders holding 15% or more of our outstanding voting stock from acquiring
the Company, without our board of directors' consent, for at least three years
from the date they first hold 15% or more of the voting stock.




Item 7A.
            Quantitative and Qualitative
      Disclosures About Market
Risk.





Not
required for smaller reporting companies.




Item 8.
            Financial Statements and
      Supplementary Data.




See pages
F-1 through F-35.





Item 9.
            Changes in and Disagreements With
      Accountants on Accounting and Financial
  Disclosure.




Not
applicable.




Item 9A.
            Controls and
      Procedures.




Not
applicable.




Item
9A(T).
            Controls and
      Procedures.




Disclosure
Controls





We
carried out an evaluation required by Rule 13a-15 under the
supervision and with the participation of our management, including our
Principal Executive Officer and Principal Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures as such term is defined in Rule 13a-15(e) of the Securities Exchange
Act of 1934 (the “Exchange Act”).





Disclosure
controls and procedures are designed with the objective of ensuring that (i)
information required to be disclosed in an issuer's reports filed under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC rules and forms and (ii) information is accumulated
and communicated to management, including our Principal Executive Officer and
Principal Financial Officer, as appropriate to allow timely decisions regarding
required disclosures.





The
evaluation of our disclosure controls and procedures included a review of our
objectives and processes and effect on the information generated for use in this
report.  This type of evaluation is done quarterly so that the
conclusions concerning the effectiveness of these controls can be reported in
our periodic reports filed with the SEC.  We intend to maintain these
controls as processes that may be appropriately modified as circumstances
warrant.





Based on
their evaluation, our Principal Executive Officer and Principal Financial
Officer have concluded that our disclosure controls and procedures are effective
in timely alerting them to material information which is required to be included
in our periodic reports filed with the SEC as of the end of the period covering
this report.





Management’s
Report on Internal Control Over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act
Rule 13a-15(f).  Under the supervision and with the participation
of our management, including our Principal Executive Officer and Principal
Financial Officer, we conducted an evaluation of the effectiveness of our
internal control over financial reporting as of December 31, 2009 based on
the criteria set forth in Internal Control — Integrated Framework issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on
our evaluation under the criteria set forth in Internal Control —
Integrated Framework, our management concluded that our internal control over
financial reporting was effective as of December 31, 2009.





However,
a control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Management necessarily applied its judgment in assessing the benefits
of controls relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been
detected. The design of any system of controls is based in part upon certain
assumptions about the likelihood of future events, and there can be no assurance
that any design will succeed in achieving its stated goals under all potential
future conditions, regardless of how remote. Because of the inherent limitations
in a control system, misstatements due to error or fraud may occur and may not
be detected.


19





This
report does not include an attestation report of our independent registered
public accounting firm regarding internal control over financial reporting. We
were not required to have, nor have we engaged our independent registered public
accounting firm to perform, an audit on our internal control over financial
reporting pursuant to the rules of the SEC that permit us to provide only
management’s report in this report.





Changes
in Internal Control Over Financial Reporting





In the
fourth quarter of 2009, the Company strengthened its internal control and review
procedures with respect to accounting for stock compensation, including
subsequently entering into an agreement with a third-party equity administration
software provider.  There were otherwise no significant changes in our
internal control over financial reporting during the fourth quarter of 2009 that
have materially affected, or are reasonably likely to materially affect, our
internal control over financial reporting.





Item 9B.
            Other
      Information.





None.




PART
III





Item
      10.
            Directors,
      Executive Officers and Corporate
Governance.





The
following is a list of our executive officers and directors. All directors serve
one-year terms or until each of their successors are duly qualified and elected.
The officers are elected by the Board of Directors.





Name
              
              Age
              
              PositionMichael
      Mathews
              
              48
              
              Chief
      Executive Officer and DirectorMichael
      Katz
              
              31
              
              President
      and DirectorRoger
      Clark
              
              41
              
              Chief
      Financial OfficerAndrew
      Katz
              
              29
              
              Chief
      Technology OfficerJason
      Lynn
              
              37
              
              Chief
      Strategy OfficerDave
      Myers
              
              40
              
              Executive
      Vice President, OperationsMichael
      Brauser
              
              54
              
              Co-ChairmanBarry
      Honig
              
              38
              
              Co-ChairmanBrett
      Cravatt
              
              36
              
              Director





Director
Biographies





Michael
Brauser has served as Co-Chairman since August 28, 2007.  Mr. Brauser
served as Chairman of the Board of Directors of SendTec, Inc. from October 2005
through November 2006.  Mr. Brauser has been the manager of Marlin
Capital Partners, LLC, a private investment company, since 2003.  He
is a private investor.  From 1999 through 2002, he served as President
and Chief Executive Officer of Naviant, Inc. (eDirect, Inc.), an Internet
marketing company.  He also was the founder of Seisant Inc.
(eData.com, Inc.).  Mr. Brauser was selected as a director due to his
significant experience in the Internet industry as well as his extensive
business and management expertise from his background as an executive officer of
a number of public companies.  Mr. Brauser has extensive knowledge of
Internet marketing companies, accounting and finance expertise.  He
also is a large shareholder.





Barry Honig has served as
Co-Chairman since August 28, 2007. Since January 2004, Mr. Honig has been the
President of GRQ Consultants, Inc. 401(k), an investor and consultant to early
stage companies. He is a private investor.  Mr. Honig was selected to
serve as a director on our Board due to his success as an investor, extensive
knowledge of the capital markets, his judgment in assessing business strategies
taking into account any accompanying risks, and his knowledge of the marketing
industry. He is also a large shareholder.





Brett Cravatthas served as a
director since June 5, 2009. Since 2006, Mr. Cravatt has been the Chief
Executive Officer and founder of WebYes! LLC. WebYES! finds new customers every
day online for clients in select verticals by designing, creating and marketing
web properties tailored to specific consumer products and services. Prior to
WebYES!, Mr. Cravatt served as the Chief Operating Officer of Vendare Media (now
Connexus). Mr. Cravatt joined Vendare Media in March 2001 via the acquisition of
SportSkill.com, a fantasy sports software company co-founded by Mr. Cravatt.
Prior to SportSkill.com, Mr. Cravatt was a corporate securities attorney for
Loeb & Loeb, LLP, where he handled various corporate matters for start-up
companies and Fortune 1000 clients. Mr. Cravatt holds a Bachelor's degree in
Political Science from U. C. Berkeley and a J. D. from Stanford Law
School.  Mr. Cravatt was selected to serve as a director on our Board
due to his valuable financial and legal expertise and his extensive experience
with Internet marketing companies.


20





Michael Katz has served as
our President and a director since August 31, 2007. From 2003 until we
acquired Desktop on August 31, 2007, Mr. Katz was the founder, Chief Executive
Officer, and President of Desktop. Mr. Katz graduated from Syracuse University
with a degree in Finance and Economics.  Mr. Katz was selected to
serve as a director on our Board due to his depth of knowledge of interCLICK,
including its operations, his extensive knowledge of the Internet marketing
industry and his position as President of interCLICK.





Michael Mathews has served as
our Chief Executive Officer and a director since August 28, 2007. Mr. Mathews is
one of the founders of Customer Acquisition and served as its Chief Executive
Officer, President and a director since its inception in June 2007. From May 15,
2008 until June 30, 2008, Mr. Mathews served as our interim Chief Financial
Officer until David Garrity was appointed (Mr. Garrity was later succeeded as
CFO by Roger Clark). From 2004 to 2007, Mr. Mathews served as the senior
vice-president of marketing and publisher services for World Avenue U.S.A., LLC,
an Internet promotional marketing company. Mr. Mathews graduated from San
Francisco State University with a degree in Marketing and holds a Masters in
Business Administration from Golden Gate University. Mr. Mathews was selected to
serve as a director on our Board due to his depth of knowledge of interCLICK,
including its operations, its strategies, his extensive knowledge of the
Internet marketing industry and his position as Chief Executive Officer of
interCLICK.





Executive
Officer Biographies





See Michael Mathews’ biography
above.





See Michael Katz’s biography
above.





Roger Clarkhas served as our
Chief Financial Officer since August 7, 2009.  From 1994 until August 2009,
Mr. Clark was an executive with IAC/InterActiveCorp. which operated more than 50
Internet businesses worldwide. From 2006 until 2009, Mr. Clark was Vice
President, Finance at IAC Advertising Solutions and in 2009 served in the Office
of the Chief Financial Officer at IAC Search & Media. From 2002 to 2006, Mr.
Clark was the Vice President, Investor Relations and Finance at
IAC/InterActiveCorp. Mr. Clark was an auditor with Ernst & Young, LLP from
1991 until 1994, and became a Certified Public Accountant in 1994; his current
status is not practicing.





Andrew Katz has served as our
Chief Technology Officer since August 31, 2007. From 2004 until we acquired
Desktop on August 31, 2007, Mr. Katz was the Chief Technology Officer of
Desktop. From February 2004 until July 1, 2008, Mr. Katz also served as the
Chief Executive Officer of mStyle, LLC. Prior to mStyle, he served as the Senior
Software Engineer for Jenzabar, Inc. Mr. Katz is the brother of Michael Katz,
our President.





Jason Lynnhas
served as our Chief Strategy Officer since March 2010 and previously was
our Vice President of Product Development from June 2008 until March 2010.
From July 2007 through July 2008, Mr. Lynn was the Director of Solutions
Engineering at Right Media, LLC, a wholly-owned subsidiary of Yahoo! Inc. From
August 2006 through July 2007, Mr. Lynn was the Product Manager at TACODA
Systems, Inc., a provider of behavioral targeting solutions to web publishers.
From June 2004 until July 2006, he was self-employed as an IT Systems
Consultant.   Previously, he spent seven years in the
Internet technology space in positions with Intel, UUnet, and
Navisite.





Dave Myershas served as our
Executive Vice President, Operations since March 2010 and previously was
our Vice President of Operations from April 2009 until March 2010. From
2006 until joining interCLICK, Mr. Myersworked for Yahoo! Inc.
and Right Media (which was acquired by Yahoo! Inc. in July 2007) as a Senior
Director of Advertiser Marketplaces Operations and Senior Director of Right
Media Client Services, respectively. From 2004 to 2006, Mr. Myers was an
Enterprise Services Engagement Manager at Microsoft Corporation.





Corporate
Governance





Board
Responsibilities and Structure




The Board
oversees, counsels, and directs management in the long-term interest of
interCLICK and its shareholders. The Board’s responsibilities
include:




·
            Establishing broad corporate
      policies and




·
            Reviewing the overall performance
      of interCLICK.




The Board
is not, however, involved in the operating details on a day-to-day
basis.


21





Board
Committees and Charters





The Board
and its Committees meet throughout the year and act by written consent from time
to time as appropriate. The Board
has formed Audit, Compensation and Nominating Committees. Committees regularly
report on their activities and actions to the Board. The Board appoints members
to its: Audit Committee, Compensation Committee and Nominating Committee. The
Audit Committee and the Nominating Committee each have a written charter
approved by the Board.





The
following table identifies the independent and non-independent current Board and
Committee members:





Name
                  
                  Independent
                  
                  
                  Audit
                  
                  
                  Compensation
                  
                  
                  NominatingMichael
      Brauser
                  
                  
                  P
                  
                  
                  
                  P
                  
                  
                  
                  P
                  
                  
                  
                  PBarry
      Honig
                  
                  
                  P
                  
                  
                  
                  P
                  
                  
                  
                  P
                  
                  
                  
                  PBrett
      Cravatt
                  
                  
                  P
                  
                  
                  
                  P
                  
                  
                  
                  P
                  
                  
                  
                  PMichael
      KatzMichael
      Mathews





Our Board
has determined that Messrs. Cravatt, Brauser and Honig are independent under the
NASDAQ Stock Market Listing Rules.





Audit
Committee




The Audit
Committee’s primary role is to review our accounting policies and any issues
which may arise in the course of the audit of our financial statements. The
Audit Committee selects our independent registered public accounting firm,
approves all audit and non-audit services, and reviews the independence of our
independent registered public accounting firm. The Audit Committee also reviews
the audit and non-audit fees of the auditors. Our Audit Committee is also
responsible for certain corporate governance and legal compliance matters
including internal and disclosure controls and Sarbanes-Oxley compliance. The
members of the Audit Committee are Brett Cravatt, Michael Brauser and Barry
Honig. Our Board has determined that Messrs. Cravatt and Brauser are each
qualified as an Audit Committee Financial Expert, as that term is defined by the
rules of the SEC and in compliance with the Sarbanes-Oxley Act of 2002. The
Board has determined that Messrs. Cravatt, Brauser and Honig are independent in
accordance with the NASDAQ Stock Market independence standards for audit
committees.





Compensation
Committee





The
function of the Compensation Committee is to review and recommend the
compensation of benefits payable to our officers, review general policies
relating to employee compensation and benefits and administer our various stock
option plans. The members of the Compensation Committee are Messrs. Cravatt,
Brauser and Honig.





Nominating
Committee





The
purpose and responsibilities of the Nominating Committee include the
identification of individuals qualified to become Board members, the selection
or recommendation to the Board of nominees to stand for election as directors,
the oversight of the evaluations of the Board and management, and review with
the Board from time to time the appropriate skills and characteristics required
of Board members in the context of the current make-up of the Board, including
issues of diversity, age, skills such as understanding of technology, finance
and marketing. The members of the Nominating Committee are Messrs. Cravatt,
Brauser and Honig.




Code
of Ethics




Our Board
of Directors has adopted a Code of Ethics that applies to all of our employees,
including our Chief Executive Officer and Chief Financial Officer. Although not
required, the Code of Ethics also applies to our directors. The Code of Ethics
provides written standards that we believe are reasonably designed to deter
wrongdoing and promote honest and ethical conduct, including the ethical
handling of actual or apparent conflicts of interest between personal and
professional relationships, full, fair, accurate, timely and understandable
disclosure and compliance with laws, rules and regulations, including insider
trading, corporate opportunities and whistle-blowing or the prompt reporting of
illegal or unethical behavior. A request for a copy, free of charge, can be made
in writing to interCLICK, Inc. 257 Park Avenue South, Suite 602, New York, NY
10010 Attention: Mr. Michael Mathews.





Board
Diversity





While we
do not have a formal policy on diversity, our Board considers diversity to
include the skill set, background, reputation, type and length of business
experience of our Board members as well as a particular nominee’s contributions
to that mix.  Although there are many other factors, the Board seeks
individuals with experience on public company boards as well as experience with
Internet marketing, legal and accounting skills.


22


Board
Assessment of Risk
 
 Our risk
management function is overseen by our Board.  Through our policies,
our Code of Ethics and our Board committees’ review of financial and other
risks, our management keeps our Board apprised of material risks and provides
our directors access to all information necessary for them to understand and
evaluate how these risks interrelate, how they affect interCLICK, and how
management addresses those risks.  Mr. Mathews, a director and Chief
Executive Officer, and Mr. Clark, our Chief Financial Officer, work closely
together with the Board once material risks are identified on how to best
address such risk.  If the identified risk poses an actual or
potential conflict with management, our independent directors may conduct the
assessment. Presently, the primary risks affecting interCLICK include our
ability to continue increasing market share in an intensely competitive online
advertising market, successfully execute  our business strategy and
deploy a differentiated technology solution, and effectively raise
sufficient capital as we scale our business. The Board focuses on these key
risks and interfaces with management on seeking solutions.
 
 Board
Structure
  Since we
acquired Desktop in August 2007, our Board has separated the positions of
Chairman of the Board and Chief Executive Officer.  Since that time,
Messrs. Michael Brauser and Barry Honig have acted as our Co-Chairmen and Mr.
Michael Mathews has acted as our Chief Executive Officer.  Separating
these positions allows Mr. Mathews to focus on our day-to-day business while
allowing the Co-Chairmen of the Board to lead the Board in its fundamental role
of providing advice to management and acting as an independent oversight of
management.  Because of our rapid growth, we believe that this
leadership structure is appropriate for us. While our Bylaws and corporate
governance guidelines do not require that our Chairman and Chief Executive
Officer positions be separate, the Board believes having these separate
positions and having two independent outside directors serve as Co-Chairmen is
the appropriate leadership structure for interCLICK at this time and
demonstrates our commitment to good corporate governance.
 
 Shareholder
Communications
  Although
we do not have a formal policy regarding communications with the Board of
Directors, shareholders may communicate with the Board by writing to us
interCLICK, Inc., 257 Park Avenue South, Suite 602, New York, NY 10010
Attention: Mr. Michael Mathews, or by facsimile (646) 558-1225. Shareholders who
would like their submission directed to a member of the Board may so specify,
and the communication will be forwarded, as appropriate.
 
 Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act requires our directors, executive officers, and
persons who own more than 10% of our common stock to file reports of ownership
and changes in ownership of our common stock with the SEC.  Based on
the information available to us during 2009, we believe that all applicable
Section 16(a) filing requirements were met on a timely basis.
 
 Item
11.          Executive
Compensation.
 
 The
following information is related to the compensation paid, distributed or
accrued by us for 2009 and 2008 to our Chief Executive Officer (principal
executive officer) and the two other most highly compensated executive officers
serving at the end of the last fiscal year whose compensation exceeded $100,000
(the “Named Executive Officers”).
 
 2009
Summary Compensation Table
 
 Non-EquityName and
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      Stock
                                      
                                      
                                      Option
                                      
                                      
                                      Incentive PlanPrincipal Position
                                      
                                      Year
                                      
                                      Salary
                                      
                                      
                                      Bonus
                                      
                                      
                                      Awards
                                      
                                      
                                      Awards
                                      
                                      
                                      Compensation
                                      
                                      
                                      Total(a)
                                      
                                      (b)
                                      
                                      ($)(c)
                                      
                                      
                                      ($)(d)
                                      
                                      
                                      ($)(e)(1)
                                      
                                      
                                      ($)(f)(1)
                                      
                                      
                                      ($)(g)(2)
                                      
                                      
                                      ($)(j)Michael
      Mathews
                                      
                                      2009
                                      
                                      
                                      347,618
                                      
                                      
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      
                                      124,000
                                      
                                      
                                      
                                      177,500
                                      
                                      
                                      
                                      649,118Chief
      Executive Officer
                                      
                                      2008
                                      
                                      
                                      325,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      70,000
                                      
                                      
                                      
                                      395,000Michael
      Katz
                                      
                                      2009
                                      
                                      
                                      295,833
                                      
                                      
                                      
                                      60,000
                                      
                                      
                                      -
                                      
                                      
                                      
                                      763,000
                                      
                                      
                                      
                                      90,000
                                      
                                      
                                      
                                      1,208,833President
                                      
                                      2008
                                      
                                      
                                      250,000
                                      
                                      
                                      
                                      -
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      112,615
                                      
                                      
                                      
                                      362,615Andrew
      Katz (3)
                                      
                                      2009
                                      
                                      
                                      243,750
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      56,250
                                      
                                      
                                      
                                      545,000
                                      
                                      
                                      
                                      123,750
                                      
                                      
                                      
                                      968,750Chief
      Technology Officer (4)
                                      
                                      2008
                                      
                                      
                                      181,875
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      354,000
                                      
                                      
                                      
                                      56,250
                                      
                                      
                                      
                                      592,125Roger
      Clark (5)
                                      
                                      2009
                                      
                                      
                                      89,732
                                      
                                      
                                      
                                      66,575
                                      
                                      
                                      
                                      37,400
                                      
                                      
                                      
                                      785,000
                                      
                                      
                                      
                                      45,925
                                      
                                      
                                      
                                      1,024,632Chief
      Financial Officer
 
 23
  (1)
              The
      amounts in these columns represent the fair value of the award as of the
      grant date as computed in accordance with FASB ASC Topic 718 and the
      recently revised SEC disclosure rules. These rules also require prior year
      amounts to be recalculated in accordance with the rule (and therefore any
      number previously disclosed in our 2008 Form 10-K regarding our Named
      Executive Officers compensation on this table or any other table may not
      reconcile.)  These amounts represent awards that are paid in
      shares of common stock or options to purchase shares of our common stock
      and do not reflect the actual amounts that may be realized by the Named
      Executive Officers.
 (2)
              Represents
      a cash bonus based on the satisfaction of a performance target of which
      the outcome was substantially uncertain to occur at the time it was
      established. Under SEC rules, when a cash bonus is substantially
      uncertain, the bonus is disclosed in this
  column.
 (3)
              Includes
      28,125 shares of restricted common stock which vesting terms were modified
      to provide for vesting each calendar quarter from
      semi-annually.
 (4)
              Includes
      100,000 options re-priced from $5.90 to $2.62 per share in
      2008.
 (5)
              Mr.
      Roger Clark has been our Chief Financial Officer since August 7,
      2009.  Although he is not a Named Executive Officer as defined
      by SEC regulations, interCLICK is voluntarily disclosing Mr. Clark’s
      compensation.
 
 Named
Executive Officer Compensation
  Michael Mathews.
Effective on June 28, 2007, we entered into an employment agreement with Michael
Mathews, to serve as our Chief Executive Officer. In accordance with the
employment agreement, Mr. Matthews was paid a base salary of: (i) $325,000 in
his first year of employment, (ii) $340,000 in his second year of employment,
and (iii) currently receives $355,000 in his third year of employment, and will
receive an agreed upon salary for all future years of employment. In addition to
a base salary, Mr. Mathews is eligible to receive an annual performance bonus
based upon the achievement of pre-established performance milestones tied to our
revenues and earnings of which at least half would be paid in cash and the
remaining in interCLICK stock. If performance milestones are met, Mr. Mathews’
bonus will be 50% of his base salary for the year the milestone was
met.  For 2009, Mr. Mathews received a $177,500 bonus, of which
$149,167 was paid in February 2010.  Additionally, we agreed in 2007
to (i) pay his former employer $100,000, (ii) pay a $50,000 relocation fee and
(iii) guarantee a $50,000 minimum bonus payment. Also in 2007, Mr. Mathews
received 700,000 shares of vested founders stock and was granted 725,000 stock
options vesting in quarterly increments over three years exercisable at $2.00
per share.  In February 2009, Mr. Mathews received 100,000
fully-vested stock options, exercisable at $1.52 per share.
 
 Michael Katz. On
August 31, 2007, we entered into an employment agreement with Michael Katz, to
serve as our President. Under the agreement, Mr. Katz was to receive an annual
base salary of $250,000. In February 2009, Mr. Katz’s base salary was increased
to $300,000.  Under his agreement, he also received a $75,000 signing
bonus and a bonus based on pre-established performance milestones half payable
in stock and half in cash. If the performance milestone is met, it shall equal
30% of his base salary for that year.  In March 2010, the Board
approved an amendment to his agreement increasing the target bonus to
50%.  In the event that the Board and Mr. Katz are unable to agree on
a mutually acceptable performance milestone, Mr. Katz will receive a guaranteed
annual bonus for such fiscal year of not less than 15% of his base salary. In
his sole discretion, Mr. Katz may elect to receive such annual bonus in capital
stock at the basis determined by our Board.  For 2009, Mr. Katz
received a $150,000 bonus, of which $90,000 was paid in March
2010.  Additionally on August 31, 2007, Mr. Katz was granted 150,000
stock options vesting annually on each over a four year period exercisable
at $2.00 per share which are now fully vested. On June 5, 2009, Mr. Katz was
granted 350,000 stock options vesting quarterly over four years beginning June
30, 2009, exercisable at $2.60 per share.
 
 Andrew Katz.
Effective March 3, 2008, we entered into an employment agreement with Mr. Andrew
Katz, our Chief Technology Officer. The current term of his agreement expires on
March 3, 2011 but will be automatically renewed for additional one-year periods
until either we or Mr. Katz gives the other party written notice of its intent
not to renew at least 60 days prior to the end of the then current term. Mr.
Katz was paid a base salary of $225,000 in his first year of employment,
currently receives $247,500 and will continue to receive a 10% increase on each
one-year anniversary of entering into the agreement. Under his agreement, he is
entitled to receive a bonus based on pre-established performance milestones of
which at least half would be payable in cash and the remainder in interCLICK
stock. If the performance milestone is met, it shall equal 50% of his base
salary for that year. For 2008, Mr. Katz received a cash bonus of $56,250 paid
in 2009 and 28,125 shares of restricted stock to vest semi-annually over four
years.  On October 14, 2009, we agreed to modify the vesting of
these shares from vesting semi-annually to vesting each calendar
quarter.  For 2009, Mr. Katz received a $123,750 bonus which was paid
in February 2010. Mr. Katz was granted 50,000 stock options exercisable at $2.00
per share vesting annually over four years beginning September 21,
2008.  In 2008, Mr. Katz was granted 100,000 stock options exercisable
at $5.90 per share vesting annually over four years beginning March 3, 2009. On
September 24, 2008, these options were repriced at $2.62 per share. On June 5,
2009, Mr. Katz was granted 250,000 stock options vesting quarterly over four
years beginning June 30, 2009, exercisable at $2.60 per share.
 
 Roger Clark.
Effective August 7, 2009, we entered into a three-year employment agreement with
Roger Clark, to serve as our Chief Financial Officer.  Mr. Clark receives a
$225,000 base salary in his first year of employment and will receive at least a
10% increase each year thereafter. In addition to a base salary, Mr. Clark is
eligible to receive an annual bonus based upon the achievement of
pre-established annual individual and interCLICK performance goals. If the
performance goals are met, Mr. Clark’s bonus will be equal to 50% of his base
salary for the year the milestone is met and may be paid in any combination of
cash and interCLICK stock that Mr. Clark determines.  For 2009, Mr. Clark
received a $112,500 bonus, of which $25,000 was paid in September 2009, and
$81,500 was paid in March 2010.  Mr. Clark also received 10,000 shares
of common stock which vested six months after commencing
employment.  Mr. Clark was granted 250,000 stock options vesting in
quarterly increments over three years beginning September 30, 2009, exercisable
at $3.20 per share.
  24
  Termination
Provisions
 
 The table
below describes the severance payments that our executive officers are entitled
to in connection with a termination of their employment upon death, disability,
without cause, for Good Reason, change of control and the non-renewal of their
employment at the discretion of interCLICK.  All of the termination
provisions are intended to comply with Section 409A of the Internal Revenue Code
of 1986 and the Regulations thereunder.
 
 Michael Mathews
                        
                        Roger Clark
                        
                        Michael Katz
                        
                        Andrew KatzDeath
                        
                        None
                        
                        None
                        
                        12 months base salary
                        
                        NoneTotal Disability
                        
                        None
                        
                        None
                        
                        12 months base salary
                        
                        NoneDismissal
      Without Cause
                        
                        18
      months base salary and 1,350,000 stock options immediately
      vest
                        
                        The
      greater of 12 months base salary or the remainder of the base salary due
      under the employment agreement and all stock options or shares of
      restricted stock immediately vest
                        
                        The
      greater of 12 months base salary or the reminder of the base salary due
      under the employment agreement
                        
                        Six
      months base salaryResignation
      for Good
                          Reason
      (1)
                        
                        18
      months base salary and 1,350,000 stock options immediately
      vest
                        
                        12
      months base salary and all stock options or shares of restricted stock
      scheduled to vest within one year immediately vest
                        
                        The
      greater of 12 months base salary or the remainder of the base salary due
      under the employment agreement
                        
                        Six
      months base salaryChange
      of Control
                        
                        All
      stock options and restricted stock immediately vest
                        
                        All
      stock options and restricted stock immediately vest
                        
                        All
      stock options and restricted stock immediately vest
                        
                        NoneExpiration
      of Initial Termand
      interCLICK does notrenew
                        
                        None
                        
                        None
                        
                        The
      greater of 12 months base salary or the remainder of the base salary due
      under the employment agreement
                        
                        None
 
 
 (1)
                Generally, Good Reason in the
      above agreements include the material diminution of the executives’
      duties, any material reduction in base salary without consent, the
      relocation of the geographical location where the executive performs
      services or any other action that constitutes a material breach by
      interCLICK under the employment
  agreements.
 
 Mr. David
Garrity, who served as our Chief Financial Officer from June 30, 2008 until
August 7, 2009, was receiving a base salary of $235,000 when he resigned. His
employment agreement provided for six months of base salary and benefits in the
event that he was terminated without cause (which he was). In order to ensure
his continued availability during the transition period, we entered into a six
month consulting agreement with Mr. Garrity which paid him the full amount of
his severance and his stock options continued to vest while he served as a
consultant.
  25
 
 Outstanding
Equity Awards At 2009 Fiscal Year-End
 
 Listed
below is information with respect to unexercised options, stock that has not
vested and equity incentive awards for each Named Executive Officer as of
December 31, 2009:
 
 OUTSTANDING EQUITY AWARDS AT 2009 FISCAL YEAR-ENDOPTION AWARDS
                                                          
                                                          STOCK AWARDSName
                                                            (a)
                                                          
                                                          Number of
                                                            Securities
                                                            Underlying
                                                            Unexercised
                                                            Options
                                                            (#)
                                                            Exercisable
                                                            (b)
                                                          
                                                          
                                                          Number of
                                                            Securities
                                                            Underlying
                                                            Unexercised
                                                            Options
                                                            (#)
                                                            Unexercisable
                                                            (c)
                                                          
                                                          
                                                          Option
                                                            Exercise
                                                            Price
                                                            ($)
                                                            (e)
                                                          
                                                          Option
                                                            Expiration
                                                            Date
                                                            (f)
                                                          
                                                          Number of
                                                            Shares or
                                                            Units of
                                                            Stock That
                                                            Have Not
                                                            Vested
                                                            (#)
                                                            (g)
                                                          
                                                          
                                                          Market
                                                            Value of
                                                            Shares or
                                                            Units of
                                                            Stock That
                                                            Have Not
                                                            Vested
                                                            ($)
                                                            (h)Michael
      Mathews
                                                          
                                                          
                                                          543,750
                                                          
                                                          
                                                          
                                                          181,250
                                                          (1)
                                                          
                                                          
                                                          2.00
                                                          
                                                          8/28/1283,333
                                                          
                                                          
                                                          
                                                          41,667
                                                          (2)
                                                          
                                                          
                                                          2.00
                                                          
                                                          10/12/12100,000
                                                          
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          1.52
                                                          
                                                          2/6/14Michael
    Katz
                                                          
                                                          
                                                          150,000
                                                          
                                                          
                                                          
                                                          0
                                                          
                                                          
                                                          
                                                          2.00
                                                          
                                                          8/31/1265,625
                                                          
                                                          
                                                          
                                                          284,375
                                                          (3)
                                                          
                                                          
                                                          2.60
                                                          
                                                          6/5/14Andrew Katz
                                                          
                                                          
                                                          25,000
                                                          
                                                          
                                                          
                                                          25,000
                                                          (4)
                                                          
                                                          
                                                          2.00
                                                          
                                                          9/21/1233,333
                                                          (5)
                                                          
                                                          
                                                          66,667
                                                          (5)
                                                          
                                                          
                                                          2.62
                                                          
                                                          9/24/1346,875
                                                          
                                                          
                                                          
                                                          203,125
                                                          (3)
                                                          
                                                          
                                                          2.60
                                                          
                                                          6/5/1421,094
                                                          (6)
                                                          
                                                          
                                                          110,322
                                                          (6)Roger
      Clark
                                                          
                                                          
                                                          41,667
                                                          
                                                          
                                                          
                                                          208,333
                                                          (7)
                                                          
                                                          
                                                          3.20
                                                          
                                                          8/7/1410,000
                                                          (8)
                                                          
                                                          
                                                          52,300
                                                          (8)
 (1)
                  These
      options vest quarterly over a three year period. The remaining options
      vest on February 28, 2010, May 28, 2010 and August 28,
    2010.
 (2)
                  These
      options vest quarterly over a three year period. The remaining options
      vest on January 12, 2010, April 12, 2010, July 12, 2010 and October 12,
      2010.
 (3)
                  These
      options vest quarterly over a four year period. The remaining options vest
      on March 31, 2010, June 30, 2010, September 30, 2010, December 31,
      2010,  March 31, 2011, June 30, 2011, September 30, 2011,
      December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012,
      December 31, 2012 and March 31,
2013.
 (4)
                  These
      options vest annually over a four year period.  The remaining
      options vest on September 21, 2010 and
2011.
 (5)
                  These
      options vest annually over a three year period.  During 2008,
      these options were repriced from $5.90 to $2.62.  The remaining
      options vest on September 24, 2010 and
2011.
 (6)
                  These
      shares vest quarterly over a four year period and the remaining vesting
      dates are March 31, 2010, June 30, 2010, September 30, 2010, December 31,
      2010,  March 31, 2011, June 30, 2011, September 30, 2011,
      December 31, 2011, March 31, 2012, June 30, 2012, September 30, 2012 and
      December 31, 2012. The market value was calculated based on the product of
      the December 31, 2009 closing price of $5.23 and the number of shares
      remaining unvested at December 31,
2009.
 (7)
                  These
      options vest quarterly over a three year period and the remaining vesting
      dates are March 31, 2010, June 30, 2010, September 30, 2010, December 31,
      2010,  March 31, 2011, June 30, 2011, September 30, 2011,
      December 31, 2011, March 31, 2012 and June 30,
  2012.
 (8)
                  These
      shares vested on February 6, 2010.  The market value was
      calculated based on the product of the December 31, 2009 closing price of
      $5.23 and the number of shares remaining unvested at December 31,
      2009.
  26
  Equity
Compensation Plan Information
 
 Our Board
has adopted the 2007 Stock Incentive Plan (the “Equity Plan”) and the 2007
Incentive Stock and Award Plan (the “Incentive Plan) (collectively, the
“Plans”).  The Equity Plan reserves 2,250,000 and the Incentive Plan
provides for the grant of up to 3,112,500 stock options or shares of common
stock to directors, officers, consultants, advisors or employees of
interCLICK. As of March 25, 2010,
there were no shares available for grant under the Plans.
 
 The
following chart reflects the number of options granted and the weighted average
exercise price under our compensation plans as of December 31,
2009.
 
 Aggregate
                            
                            
                            
                            
                            
                            AggregateNumber of
                            
                            
                            Weighted
                            
                            
                            Number ofSecurities
                            
                            
                            Average
                            
                            
                            SecuritiesUnderlying
                            
                            
                            Exercise
                            
                            
                            AvailableOptions
                            
                            
                            Price Per
                            
                            
                            forGranted
                            
                            
                            Share
                            
                            
                            GrantEquity compensation
      plans approved by security holders(1)
      (2)(3)
                            
                            
                            5,144,167
                            
                            
                            $
                            2.69
                            
                            
                            
                            340,208Equity
      compensation plans not approved by security holdersTotal
                            
                            
                            5,144,167
                            
                            
                            $
                            2.69
                            
                            
                            
                            340,208
  (1)
                Because
      they are identical, for purposes of this table, we have combined the
      Plans.
 (2)
                Includes
      two option grants granted outside of the Plans, including 150,000 5-year
      stock options to purchase common stock exercisable at $2.40 per share
      granted to a director.
 (3)
                On October 23, 2009, our shareholders ratified the adoption of our
      equity compensation plans.
 
 2009
Director Compensation
 
 In 2009,
we did not pay cash compensation to our directors for service on our
Board.  For 2010 service, our non-employee directors will receive
$26,000 per year which will be paid in equal installments each calendar
quarter.  Directors who are employed by interCLICK are not compensated
for their service on the Board.  Therefore, this table does not
include Michael Mathews and Michael Katz.  Non-employee members of our
Board were compensated with stock options for 2009 service.
 
 OptionName
                        
                        Awards(a)
                        
                        ($)(1)Michael
      Brauser (2)
                        
                        $
                        322,000Brett
      Cravatt (3)
                        
                        $
                        300,000David
      Garrity (4)
                        
                        $
                        12,400Barry
      Honig (2)
                        
                        $
                        322,000Sanford
      Rich (4)
                        
                        $
                        -
 
 (1)
              The
      amounts in this column represent the fair value of the award as of the
      grant date as computed in accordance with FASB ASC Topic 718 and the
      recently revised SEC disclosure rules. These amounts represent awards that
      are paid in options to purchase shares of our common stock and do not
      reflect the actual amounts that may be realized by the
      directors.
 (2)
              Represents
      100,000 5-year options to purchase common stock exercisable at $4.32 per
      share granted for service on the Board for 2009.  The options
      vest in equal annual increments over a four year period with the first
      vesting date being October 10,
2010.
 (3)
              Represents
      150,000 5-year stock options to purchase common stock exercisable at $2.40
      per share granted to Mr. Cravatt for his initial appointment to the
      Board.  The options vest quarterly over a four year period with
      the first vesting date being June 30,
2009.
 (4)
              Former
      director.
  27
  Item
12.          Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder
Matters.
 
 The
following table sets forth the number of shares of our common stock beneficially
owned as of March 26, 2010 by (i) those persons known by us to be owners of more
than 5% of our common stock, (ii) each director (iii) our Named Executive
Officers (as disclosed in the Summary Compensation Table), and (iv) our
executive officers and directors as a group.
 
 Title of Class
                                                    
                                                    Name and
                                                      Address of Beneficial Owner
                                                    
                                                    Amount of Beneficial
                                                      Ownership(1)
                                                    
                                                    
                                                    Percent
                                                      Beneficially
                                                      Owned(1)Directors
      and Executive Officers:Common Stock
                                                    
                                                    Michael
      Mathews
                                                      257
      Park Avenue South Ste. 602
                                                      New
      York, NY 10010 (2)(3)(4)
                                                    
                                                    
                                                    1,328,750
                                                    
                                                    
                                                    
                                                    5.2
                                                    %Common Stock
                                                    
                                                    Michael
      Katz
                                                      257
      Park Avenue South Ste. 602
                                                      New
      York, NY 10010 (2)(3)(5)
                                                    
                                                    
                                                    997,500
                                                    
                                                    
                                                    
                                                    4.2
                                                    %Common
      Stock
                                                    
                                                    Andrew
      Katz
                                                    
                                                    
                                                    152,958
                                                    
                                                    
                                                    
                                                    *4800
      T-Rex Avenue Ste. 120
                                                      Boca
      Raton, FL 33431 (2)(6)Common
      Stock
                                                    
                                                    Roger
      Clark
                                                    
                                                    
                                                    76,500
                                                    
                                                    
                                                    
                                                    *257
      Park Avenue South Ste. 602New
      York, NY 10010 (2)(7)Common
      Stock
                                                    
                                                    Michael
      Brauser
                                                      595
      S. Federal Hwy. Ste. 600
                                                      Boca
      Raton, FL 33432 (3)(8)
                                                    
                                                    
                                                    1,856,500
                                                    
                                                    
                                                    
                                                    7.8
                                                    %Common
      Stock
                                                    
                                                    Barry
      Honig
                                                      595
      S. Federal Hwy. Ste. 600
                                                      Boca
      Raton, FL 33432 (3)(9)
                                                    
                                                    
                                                    1,363,268
                                                    
                                                    
                                                    
                                                    5.7
                                                    %Common
      Stock
                                                    
                                                    Brett
      Cravatt
                                                      324
      32324 Bayview Drive
                                                      Hermosa
      Beach, CA 90254 (3)(10)
                                                    
                                                    
                                                    37,500
                                                    
                                                    
                                                    
                                                    *Common
      Stock
                                                    
                                                    All
      directors and executive officers
                                                      as
      a group (9 persons)
                                                    
                                                    
                                                    5,923,209
                                                    
                                                    
                                                    
                                                    23.5
                                                    %5%
      Shareholders:Common
      Stock
                                                    
                                                    Gerald
      Unterman
                                                      610
      Park Avenue Apt. 16A
                                                      New
      York, NY 10065 (11)
                                                    
                                                    
                                                    2,128,250
                                                    
                                                    
                                                    
                                                    8.9
                                                    %Common
      Stock
                                                    
                                                    Palo
      Alto Investors
                                                    
                                                    
                                                    1,600,000
                                                    
                                                    
                                                    
                                                    6.8
                                                    %470
      University AvenuePalo
      Alto, CA 94301 (12)
 
 * Less
than 1%
 
 (1)
              Applicable percentages
      are based on 23,694,272 shares outstanding adjusted as required by rules
      of the SEC.  Beneficial ownership is determined under the rules
      of the SEC and generally includes voting or investment power with respect
      to securities. A person is deemed to be the beneficial owner of securities
      that can be acquired by such person within 60 days whether upon the
      exercise of options or otherwise.  Shares of common stock
      subject to options, warrants and convertible notes currently exercisable
      or convertible, or exercisable or convertible within 60 days after the
      date of this report are deemed outstanding for computing
      the percentage of the person holding such securities but are not
      deemed outstanding for computing the percentage of any other person.
      Unless otherwise indicated in the footnotes to this table, interCLICK
      believes that each of the shareholders named in the table has sole voting
      and investment power with respect to the shares of common stock indicated
      as beneficially owned by them.(2)
              An
      executive officer.(3)
              A
      director.(4)
              Includes
      868,750 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.(5)
              Includes
      237,500 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.(6)
              Includes
      120,833 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.(7)
              Includes
      62,500 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.(8)
              Includes
      25,000 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.  Also includes: (i)
      1,007,500 shares held in a Partnership of which Mr. Brauser is the General
      Partner, (ii) 100,000 shares held jointly with his wife and (iii) 475,000
      shares held by a trust whereby his wife is the trustee and
      beneficiary.  28
  (9)
              Includes
      25,000 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.  Includes shares held
      in a 401(K) plan whereby Mr. Honig is the trustee.  Also
      includes 12,500 shares issuable upon the exercise of
      warrants.  Does not include shares beneficially owned by Mr,
      Honig’s father, Alan Honig.  Mr. Alan Honig beneficially owns
      less than 5% of our common stock for various accounts including as
      custodian for Mr. Barry Honig’s minor children.  Mr. Barry Honig
      disclaims the beneficial ownership of any shares held by his father, Mr.
      Alan Honig.(10)
              Includes
      37,500 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this report.(11)
              Includes
      250,000 shares issuable upon exercise of warrants.(12)
              Based
      on information in a Schedule 13G filed with the SEC which provided
      beneficial ownership as of December 31,
2009.
  Item
13.          Certain
Relationships and Related Transactions, and Director Independence.
  In
connection with our acquisition of Desktop, we were obligated to pay an
additional $1,000,000 upon Desktop achieving certain revenue
milestones.  On October 5, 2007 and September 20, 2008, Michael Katz,
our President and a director, was paid $643,000 and $357,000,
respectively.  Included in our revenues for 2008 was approximately
$43,000 from a company controlled by Michael Katz.
 
 On
September 26, 2008, Barry Honig and GRQ Consultants, Inc. 401(k) (an entity
controlled by Mr. Honig) loaned interCLICK a total of $1,300,000 and we issued
to each $650,000 6% promissory notes.  The notes were secured by a first
priority security interest in shares held by us in OPMG.  On November 26,
2008, we repaid the note issued to Mr. Honig.  On December 31, 2008, we
repaid $250,000 of the principal amount owed to GRQ and extended the due date of
the remaining $400,000 from December 31, 2008 to June 30, 2009.  On June 5,
2009, the Board of Directors approved an extension of the due date of $100,000
of the note from June 30, 2009 until December 31, 2009.  In addition, this
$100,000 note which was previously not convertible was made convertible by
replacing it with a 6% unsecured note, convertible at $2.00 per share, subject
to adjustment for stock splits, stock dividends, combinations and similar
events.  In consideration for extending the due date on the $100,000 note
and in lieu of a cash payment for interest, we issued GRQ a total of 21,055
shares of common stock with a combined value of $25,266.  On June 22, 2009,
we repaid $100,000 of the remaining $300,000 non-convertible note and extended
the due date of this remaining $200,000 non-convertible note to December 31,
2009.  On August 19, 2009, we repaid all of the principal and interest owed
under the $200,000 note.  On September 29, 2009, we repaid the remaining
$100,000 note.
  Item
14.          Principal Accountant Fees and
Services.
 
 Our Audit
Committee reviews and approves audit and permissible non-audit services
performed by our independent registered public accounting firm J.H. Cohn LLP
(“Cohn”) as well as the fees charged for such services. In its review of
non-audit service and its appointment of Cohn as our independent registered
public accounting firm, the Audit Committee considered whether the provision of
such services is compatible with maintaining independence.  Salberg
& Co., P.A. (“Salberg”) was our independent registered public accounting
firm for 2008 and provided services in 2009 until Cohn was
appointed.  Salberg’s services in 2009 consisted of the review of
interCLICK's financial statements for the quarters ended March 31 and June 30,
2009 and review of the August 2009 registration statement, the fees for which
totaled $86,000.
 
 All of
the services provided and fees charged by Cohn and Salberg were approved by the
Audit Committee. The following table shows the principal accountant fees for the
years ended December 31, 2009 and 2008.
 
 2009
                      
                      
                      2008Audit
      Fees (1)
                      
                      $
                      109,531
                      
                      
                      $
                      133,000Audit
      Related Fees (2)
                      
                      $
                      50,944
                      
                      
                      $
                      14,000Tax
      Fees
                      
                      $
                      -
                      
                      
                      $
                      -All
      Other Fees
                      
                      $
                      -
                      
                      
                      $
                      -
 
 (1)
              Audit
      fees – these fees relate to the audits of our annual consolidated
      financial statements and the review of our interim quarterly consolidated
      financial statements.(2)
              Audit
      related fees – The audit related fees for the year ended December 31, 2009
      and 2008 were for professional services rendered for assistance with
      reviews of documents filed with the
SEC.
 
 29
  PART
IV
  Item
15.          Exhibits, Financial Statement
Schedules.
  (a)           Documents
filed as part of the report.
  (1)
              Financial
      Statements.  See Index to Consolidated Financial Statements,
      which appears on page F-1 hereof. The financial statements listed in the
      accompanying Index to Consolidated Financial Statements are filed herewith
      in response to this Item.
 
 (2)
              Financial
      Statements Schedules.  All schedules are omitted because they
      are not applicable or because the required information is contained in the
      consolidated financial statements or notes included in this
      report.
 
 (3)
              Exhibits.
 
 Exhibit
                                  
                                  
                                  
                                  Incorporated by Reference
                                  
                                  Filed or
                                    Furnished#
                                  
                                  Exhibit Description
                                  
                                  Form
                                  
                                  Date
                                  
                                  Number
                                  
                                  Herewith2.1
                                  
                                  Customer
      Acquisition Network Agreement of Merger and Plan of Reorganization
      **
                                  
                                  8-K
                                  
                                  9/4/07
                                  
                                  2.12.2
                                  
                                  Desktop
      Agreement and Plan of Merger **
                                  
                                  8-K
                                  
                                  9/4/07
                                  
                                  2.23.1
                                  
                                  Amended
      and Restated Certificate of Incorporation
                                  
                                  8-K
                                  
                                  8/30/07
                                  
                                  3.13.2
                                  
                                  Certificate
      of Amendment to the Articles of Incorporation
                                  
                                  8-K
                                  
                                  7/1/08
                                  
                                  3.13.3
                                  
                                  Certificate
      of Amendment to the Articles of Incorporation
                                  
                                  8-A12b
                                  
                                  11/31/09
                                  
                                  3.33.4
                                  
                                  Bylaws
                                  
                                  S-3/A
                                  
                                  11/25/09
                                  
                                  3.64.1
                                  
                                  Form
      of Warrant dated June 22, 2009
                                  
                                  10-Q
                                  
                                  8/11/09
                                  
                                  4.310.1
                                  
                                  Michael
      Mathews Employment Agreement *
                                  
                                  8-K
                                  
                                  9/4/07
                                  
                                  10.810.2
                                  
                                  Amendment
      to Michael Mathews Employment Agreement *
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed10.3
                                  
                                  Michael
      Katz Employment Agreement *
                                  
                                  8-K
                                  
                                  9/4/07
                                  
                                  10.1110.4
                                  
                                  Amendment
      to Michael Katz Employment Agreement *
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed10.5
                                  
                                  Andrew
      Katz Employment Agreement *
                                  
                                  10-K
                                  
                                  3/31/09
                                  
                                  10.410.6
                                  
                                  Roger
      Clark Employment Agreement *
                                  
                                  8-K
                                  
                                  8/13/09
                                  
                                  10.110.7
                                  
                                  David
      Garrity Consulting Agreement *10.8
                                  
                                  Crestmark
      Accounts Receivable Financing Agreement
                                  
                                  10-K
                                  
                                  3/31/09
                                  
                                  10.2310.9
                                  
                                  Amendment
      to Crestmark Accounts Receivable Financing Agreement
                                  
                                  10-K
                                  
                                  3/31/09
                                  
                                  10.2410.10
                                  
                                  Letter
      Agreement with Crestmark increasing Line of Credit dated February 3,
      2009
                                  
                                  10-K
                                  
                                  3/31/09
                                  
                                  10.2510.11
                                  
                                  Second
      Amendment to Crestmark Accounts Receivable Financing
    Agreement
                                  
                                  10-K
                                  
                                  3/31/09
                                  
                                  10.2610.12
                                  
                                  Letter
      Agreement with Crestmark increasing Line of Credit dated August 31,
      2009
                                  
                                  10-Q
                                  
                                  11/16/09
                                  
                                  10.510.13
                                  
                                  Third
      Amendment to Crestmark Accounts Receivable Financing
    Agreement
                                  
                                  10-Q
                                  
                                  11/16/09
                                  
                                  10.610.14
                                  
                                  Amended
      and Restated 2007 Equity Incentive Plan *
                                  
                                  S-8
                                  
                                  11/17/09
                                  
                                  4.110.15
                                  
                                  Amended
      and Restated 2007 Incentive Stock and Award Plan *
                                  
                                  S-8
                                  
                                  11/17/09
                                  
                                  4.210.16
                                  
                                  Form
      of Restricted Stock Agreement *
                                  
                                  S-8
                                  
                                  11/17/09
                                  
                                  4.510.17
                                  
                                  Form
      of Employee Stock Option Agreement *
                                  
                                  S-8
                                  
                                  11/17/09
                                  
                                  4.8Form
      of Directors Stock Option Agreement *
                                  
                                  S-8
                                  
                                  11/17/09
                                  
                                  4.910.18
                                  
                                  GRQ
      Promissory Note dated June 22, 2009
                                  
                                  10-Q
                                  
                                  8/11/09
                                  
                                  4.210.19
                                  
                                  Form
      of Subscription Agreement dated June 22, 2009
                                  
                                  10-Q
                                  
                                  8/11/09
                                  
                                  10.7  30
  10.20
                                  
                                  New
      York Lease Agreement
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed21.1
                                  
                                  List
      of Subsidiaries
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed23.1
                                  
                                  Consent
      of J.H. Cohn LLP
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed23.2
                                  
                                  Consent
      of Salberg & Co., P.A.
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed31.1
                                  
                                  Certification
      of Principal Executive Officer (Section 302)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed31.2
                                  
                                  Certification
      of Principal Financial Officer (Section 302)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Filed32.1
                                  
                                  Certification
      of Principal Executive Officer and Principal Financial Officer
      (Section 906)
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Furnished
 
 *
Management compensatory plan or arrangement
 
 **The confidential disclosure
schedules are not filed in accordance with SEC Staff policy, but will be
provided to the Staff upon request.  Certain material agreements contain
representations and warranties, which are qualified by the following
factors:
 
 a.
              the
      representations and warranties contained in any agreements filed with this
      report were made for the purposes of allocating contractual risk between
      the parties and not as a means of establishing
  facts;
 b.
              the
      agreement may have different standards of materiality than standards of
      materiality under applicable securities
laws;
 c.
              the
      representations are qualified by a confidential disclosure schedule that
      contains nonpublic information that is not material under applicable
      securities laws;
 d.
              facts
      may have changed since the date of the agreements;
  and
 e.
              only
      parties to the agreements and specified third-party beneficiaries have a
      right to enforce the agreements.
 
 Notwithstanding
the above, any information contained in a schedule that would cause a reasonable
investor (or that a reasonable investor would consider important in making a
decision) to buy or sell our common stock has been included. We have been
further advised by our counsel that in all instances the standard of materiality
under the federal securities laws will determine whether or not information has
been omitted; in other words, any information that is not material under the
federal securities laws may be omitted. Furthermore, information which may have
a different standard of materiality will nonetheless be disclosed if material
under the federal securities laws.
  Copies of this report (including the
financial statements) and any of the exhibits referred to above will be
furnished at no cost to our shareholders who make a written request to
interCLICK, Inc., 257 Park Avenue South, Suite 602, New York, NY 10010
Attention: Mr. Michael Mathews.
 
 31
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) 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.
 
 Date:
March 31, 2010
 interCLICK,
      Inc.By:
                  /s/
      Michael MathewsMichael
      MathewsChief
      Executive Officer
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
 
 Signature
                                
                                Title
                                
                                Date/s/
      Roger Clark
                                
                                Chief
      Financial Officer (Principal Financial Officer and Chief Accounting
      Officer)
                                
                                March
      31, 2010Roger
      Clark/s/
      Michael Brauser
                                
                                Co-Chairman
                                
                                March
      31, 2010Michael
      Brauser/s/
      Bret Cravatt
                                
                                Co-Chairman
                                
                                March
      31, 2010Brett
      Cravatt/s/
      Barry Honig
                                
                                Director
                                
                                March
      31, 2010Barry
      Honig/s/
      Michael Katz
                                
                                Director
                                
                                March
      31, 2010Michael
      Katz/s/
      Michael Mathews
                                
                                Director
                                
                                March
      31, 2010Michael
      Mathews
 
 32


InterCLICK,
Inc. (Formerly Customer Acquisition Network Holdings, Inc.) and
Subsidiary


Index
to Consolidated Financial Statements




PageFinancial
      StatementsReports
      of Independent Registered Public Accounting Firms
                      
                      F-2Consolidated
      Balance Sheets – December 31, 2009 and 2008
                      
                      F-4Consolidated
      Statements of Operations for the years ended December 31, 2009 and
      2008
                      
                      F-5Consolidated
      Statements of Changes in Stockholders' Equity for the years ended December
      31, 2009 and 2008
                      
                      F-6Consolidated
      Statements of Cash Flows for the years ended December 31, 2009 and
      2008
                      
                      F-7Notes
      to Consolidated Financial Statements
                      
                      F-9




F-1





Report
of Independent Registered Public Accounting Firm





To the
Board of Directors and Stockholders


interCLICK,
Inc.





We have
audited the consolidated balance sheet of interCLICK, Inc. and Subsidiary as of
December 31, 2009, and the related consolidated statements of operations,
stockholders’ equity and cash flows for the year then ended.  These
financial statements are the responsibility of the Company's management. 
Our responsibility is to express an opinion on these financial statements based
on our audit.





We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that
our audit provides a reasonable basis for our opinion.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of interCLICK, Inc. and
Subsidiary as of December 31, 2009, and their results of operations and cash
flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.





As
discussed in Note 2 to the consolidated financial statements, the Company
changed the manner in which it accounts for certain of its warrants in the
period ended December 31, 2009.





/s/ J.H.
Cohn LLP


Roseland,
New Jersey


March 31,
2010


F-2




Report
of Independent Registered Public Accounting Firm
 
 To
the Board of Directors and Stockholders' of:
 interCLICK,
Inc. (Formerly Customer Acquisition Network Holdings, Inc.)
 
 We have
audited the accompanying consolidated balance sheet of interCLICK, Inc. and
Subsidiary as of December 31, 2008, and the related consolidated statement of
operations, changes in stockholders' equity, and cash flows for the year ended
December 31, 2008. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements based on our
audit.
 
 We
conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
 
 In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of interCLICK,
Inc. and Subsidiary as of December 31, 2008, and the consolidated results of its
operations and its cash flows for the year ended December 31, 2008, in
conformity with accounting principles generally accepted in the United States of
America.
 
 The
accompanying consolidated financial statements have been prepared assuming the
Company will continue as a going concern.  As discussed in Note 2 to
the consolidated financial statements, the Company reported a net loss of
$12,025,539 and used cash in operating activities of $4,151,028 for the year
ended December 31, 2008, and had a working capital deficiency and an
accumulated deficit of $1,438,181 and $15,258,506, respectively, at December 31,
2008.  These matters raise substantial doubt about the Company’s
ability to continue as a going concern.  Management's plans as to
these matters are also described in Note 2.  The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
 
 
 /s/
Salberg & Company, P.A.
  
 SALBERG
& COMPANY, P.A.
 Boca
Raton, Florida
 March 19,
2009


F-3





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


CONSOLIDATED
BALANCE SHEETS





December 31, 2009
                
                
                December 31, 2008AssetsCurrent
      assets:Cash
      and cash equivalents
                
                $
                12,653,958
                
                
                $
                183,871Accounts
      receivable, net of allowance of $383,188 and $425,000,
      respectively
                
                
                21,631,305
                
                
                
                7,120,311Due
      from factor
                
                
                1,052,167
                
                
                
                637,705Deferred
      taxes, current portion
                
                
                955,471
                
                
                
                -Prepaid
      expenses and other current assets
                
                
                367,183
                
                
                
                94,164Total
      current assets
                
                
                36,660,084
                
                
                
                8,036,051Property
      and equipment, net of accumulated depreciation of $597,288 and $ 282,490,
      respectively
                
                
                988,899
                
                
                
                596,913Intangible
      assets, net of accumulated amortization of $909,350 and $720,570,
      respectively
                
                
                421,333
                
                
                
                610,113Goodwill
                
                
                7,909,571
                
                
                
                7,909,571Investment
      in available-for-sale marketable securities
                
                
                715,608
                
                
                
                1,650,000Deferred
      debt issue costs, net of accumulated amortization of $35,028 and $6,667,
      respectively
                
                
                4,972
                
                
                
                33,333Deferred
      taxes, net of current portion
                
                
                2,579,568
                
                
                
                -Other
      assets
                
                
                192,179
                
                
                
                191,664Total
      assets
                
                $
                49,472,214
                
                
                $
                19,027,645Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Accounts
      payable
                
                $
                10,934,236
                
                
                $
                5,288,807Due
      to factor
                
                
                5,260,834
                
                
                
                3,188,425Accrued
      expenses (includes accrued compensation of $2,241,731 and $0,
      respectively)
                
                
                3,164,044
                
                
                
                320,657Income
      taxes payable
                
                
                515,306
                
                
                
                -Obligations
      under capital leases, current portion
                
                
                161,940
                
                
                
                10,615Warrant
      derivative liability
                
                
                69,258
                
                
                
                -Deferred
      rent, current portion
                
                
                3,508
                
                
                
                -Senior
      secured note payable - related party
                
                
                -
                
                
                
                400,000Payable
      and promissory note settlement liability
                
                
                -
                
                
                
                248,780Accrued
      interest
                
                
                -
                
                
                
                16,948Total
      current liabilities
                
                
                20,109,126
                
                
                
                9,474,232Obligations
      under capital leases, net of current portion
                
                
                338,562
                
                
                
                9,495Deferred
      rent
                
                
                83,823
                
                
                
                72,696Total
      liabilities
                
                
                20,531,511
                
                
                
                9,556,423Commitments
      and contingencies - See Note 12Stockholders’
      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, 23,632,707
      and 18,922,596 issued and outstanding, respectively
                
                
                23,633
                
                
                
                18,923Additional
      paid-in capital
                
                
                42,229,293
                
                
                
                24,908,509Accumulated
      other comprehensive loss
                
                
                -
                
                
                
                (197,704
                )Accumulated
      deficit
                
                
                (13,312,223
                )
                
                
                (15,258,506
                )Total
      stockholders’ equity
                
                
                28,940,703
                
                
                
                9,471,222Total
      liabilities and stockholders’ equity
                
                $
                49,472,214
                
                
                $
                19,027,645





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




F-4


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


CONSOLIDATED
STATEMENTS OF OPERATIONS





For the
                
                
                For theYear Ended
                
                
                Year EndedDecember 31, 2009
                
                
                December 31, 2008Revenues
                
                $
                55,258,703
                
                
                $
                22,452,333Cost
      of revenues
                
                
                30,072,627
                
                
                
                15,634,096Gross
      profit
                
                
                25,186,076
                
                
                
                6,818,237Operating
      expenses:General
      and administrative
                
                
                12,296,404
                
                
                
                8,351,612Sales
      and marketing
                
                
                8,748,503
                
                
                
                3,394,753Technology
      support
                
                
                3,237,528
                
                
                
                1,245,942Amortization
      of intangible assets
                
                
                188,780
                
                
                
                418,508Total
      operating expenses
                
                
                24,471,215
                
                
                
                13,410,815Operating
      income (loss) from continuing operations
                
                
                714,861
                
                
                
                (6,592,578
                )Other
      income (expense):Interest
      income
                
                
                1,053
                
                
                
                17,095Other
      than temporary impairment of available-for-sale securities
                
                
                (1,042,470
                )
                
                
                -Warrant
      derivative liability expense
                
                
                (665,690
                )
                
                
                -Interest
      expense (including amortization of debt discount of $12,000 and
      $1,239,061, respectively)
                
                
                (589,624
                )
                
                
                (1,526,298
                )Loss
      on sale of available-for-sale securities
                
                
                (55,233
                )
                
                
                (116,454
                )Loss
      on disposal of property and equipment
                
                
                -
                
                
                
                (13,635
                )Loss
      on settlement of debt
                
                
                -
                
                
                
                (20,121
                )Total
      other expense
                
                
                (2,351,964
                )
                
                
                (1,659,413
                )Loss
      from continuing operations before income taxes
                
                
                (1,637,103
                )
                
                
                (8,251,991
                )Income
      tax benefit
                
                
                2,139,640
                
                
                
                1,687,305Income
      (loss) from continuing operations before equity investment
                
                
                502,537
                
                
                
                (6,564,686
                )Equity
      in investee's loss, net of income taxes
                
                
                -
                
                
                
                (653,231
                )Income
      (loss) from continuing operations
                
                
                502,537
                
                
                
                (7,217,917
                )Discontinued
      operations:Loss
      from discontinued operations, net of income tax benefit of $0 and
      $1,016,292, respectively
                
                
                -
                
                
                
                (1,235,940
                )Loss
      on sale of discontinued operations, net of income tax benefit (provision)
      of $514 and ($2,439,597), respectively
                
                
                (706
                )
                
                
                (3,571,682
                )Loss
      from discontinued operations, net of income taxes
                
                
                (706
                )
                
                
                (4,807,622
                )Net
      income (loss)
                
                
                501,831
                
                
                
                (12,025,539
                )Other
      comprehensive income (loss):Unrealized
      gains (losses) on securities:Unrealized
      loss on available-for-sale securities, net of income tax of
      $0
                
                
                (899,999
                )
                
                
                (314,158
                )Reclassification
      adjustments for losses included in net income (loss), net of income
      tax  of $0
                
                
                1,097,703
                
                
                
                116,454Total
      other comprehensive income (loss), net of income taxes
                
                
                197,704
                
                
                
                (197,704
                )Comprehensive
      income (loss)
                
                $
                699,535
                
                
                $
                (12,223,243
                )Basic
      earnings (loss) per share:Continuing
      operations
                
                $
                0.03
                
                
                $
                (0.39
                )Discontinued
      operations
                
                
                -
                
                
                
                (0.26
                )Net
      income (loss)
                
                $
                0.03
                
                
                $
                (0.65
                )Diluted
      earnings (loss) per share:Continuing
      operations
                
                $
                0.02
                
                
                $
                (0.39
                )Discontinued
      operations
                
                
                -
                
                
                
                (0.26
                )Net
      income (loss)
                
                $
                0.02
                
                
                $
                (0.65
                )Weighted
      average number of common shares - basic
                
                
                19,950,379
                
                
                
                18,568,951Weighted
      average number of common shares - diluted
                
                
                20,953,862
                
                
                
                18,568,951





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




F-5





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY





AccumulatedAdditional
                    
                    
                    
                    
                    
                    Other
                    
                    
                    
                    
                    
                    TotalCommon Stock
                    
                    
                    Paid-In
                    
                    
                    Deferred
                    
                    
                    Comprehensive
                    
                    
                    Accumulated
                    
                    
                    Stockholders'Shares
                    
                    
                    Amount
                    
                    
                    Capital
                    
                    
                    Consulting
                    
                    
                    Loss
                    
                    
                    Deficit
                    
                    
                    EquityBalance,
      December 31, 2007
                    
                    
                    17,489,846
                    
                    
                    $
                    17,490
                    
                    
                    $
                    12,755,472
                    
                    
                    $
                    (178,481
                    )
                    
                    $
                    -
                    
                    
                    $
                    (3,232,967
                    )
                    
                    $
                    9,361,514Issuance
      of common stock in connection with Options Media Group
    merger
                    
                    
                    500,000
                    
                    
                    
                    500
                    
                    
                    
                    5,716,773
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    5,717,273Issuance
      of warrants in connection with Options Media Group merger
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    29,169
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    29,169Common
      stock and warrants issued for cash, net of offering costs of
      $87,500
                    
                    
                    712,500
                    
                    
                    
                    713
                    
                    
                    
                    2,911,787
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,912,500Common
      stock and warrants issued per price protection clause
                    
                    
                    37,500
                    
                    
                    
                    37
                    
                    
                    
                    (37
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -Common
      stock and warrants issued to settle debt
                    
                    
                    152,750
                    
                    
                    
                    153
                    
                    
                    
                    610,847
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    611,000Common
      stock issued for services
                    
                    
                    30,000
                    
                    
                    
                    30
                    
                    
                    
                    188,970
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    189,000Amortization
      of deferred consulting - warrants
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    178,481
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    178,481Stock
      options expense
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,695,528
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,695,528Unrealized
      loss on marketable securities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (197,704
                    )
                    
                    
                    -
                    
                    
                    
                    (197,704
                    )Net
      loss, 2008
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (12,025,539
                    )
                    
                    
                    (12,025,539
                    )Balance,
      December 31, 2008
                    
                    
                    18,922,596
                    
                    
                    
                    18,923
                    
                    
                    
                    24,908,509
                    
                    
                    
                    -
                    
                    
                    
                    (197,704
                    )
                    
                    
                    (15,258,506
                    )
                    
                    
                    9,471,222Cumulative
      effect of change in accounting principle
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (1,864,466
                    )
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,444,452
                    
                    
                    
                    (420,014
                    )Common
      shares issued to eliminate or modify price protection for certain common
      shares and warrants
                    
                    
                    352,500
                    
                    
                    
                    352
                    
                    
                    
                    658,659
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    659,011Stock-based
      compensation
                    
                    
                    155,625
                    
                    
                    
                    155
                    
                    
                    
                    3,394,144
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    3,394,299Common
      shares issued to extend debt maturity date
                    
                    
                    5,000
                    
                    
                    
                    5
                    
                    
                    
                    11,995
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    12,000Common
      shares issued in lieu of cash to pay accrued interest
                    
                    
                    5,528
                    
                    
                    
                    6
                    
                    
                    
                    13,260
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    13,266Common
      shares and warrants issued under private placement, net of placement
      fees
                    
                    
                    1,250,000
                    
                    
                    
                    1,250
                    
                    
                    
                    2,255,750
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    2,257,000Common
      shares issued under public offering, net of offering costs
                    
                    
                    2,875,000
                    
                    
                    
                    2,875
                    
                    
                    
                    11,516,795
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    11,519,670Unrealized
      loss on available-for-sale securities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    (899,999
                    )
                    
                    
                    -
                    
                    
                    
                    (899,999
                    )Reclassification
      adjustment for losses on available-for-sale securities included in net
      loss
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    55,233
                    
                    
                    
                    -
                    
                    
                    
                    55,233Other
      than temporary impairment on available-for-sale securities
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,042,470
                    
                    
                    
                    -
                    
                    
                    
                    1,042,470Stock
      options exercised
                    
                    
                    66,458
                    
                    
                    
                    67
                    
                    
                    
                    97,633
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    97,700Reclassification
      of warrant derivative liability to equity upon expiration of price
      protection
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    357,435
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    357,435Adjustment
      to additional paid-in capital related to tax benefit of stock based
      compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    879,579
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    879,579Net
      income, 2009
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    501,831
                    
                    
                    
                    501,831Balance,
      December 31, 2009
                    
                    
                    23,632,707
                    
                    
                    $
                    23,633
                    
                    
                    $
                    42,229,293
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    (13,312,223
                    )
                    
                    $
                    28,940,703





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




F-6


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS





For the
                
                
                For theYear Ended
                
                
                Year EndedDecember 31, 2009
                
                
                December 31, 2008Cash
      flows from operating activities:Net
      income (loss)
                
                $
                501,831
                
                
                $
                (12,025,539
                )Add
      back loss from discontinued operations, net
                
                
                706
                
                
                
                4,807,622Income
      (loss) from continuing operations
                
                
                502,537
                
                
                
                (7,217,917
                )Adjustments
      to reconcile net income (loss) from continuing operations to net cash used
      in operating activities:Stock-based
      compensation
                
                
                3,394,299
                
                
                
                1,941,191Other
      than temporary impairment of available-for-sale securities
                
                
                1,042,470
                
                
                
                -Warrant
      derivative liability expense
                
                
                665,690
                
                
                
                -Depreciation
      of property and equipment
                
                
                314,798
                
                
                
                245,489Provision
      for bad debts
                
                
                193,752
                
                
                
                414,737Amortization
      of intangible assets
                
                
                188,780
                
                
                
                418,508Loss
      on sale of available-for-sale securities
                
                
                55,233
                
                
                
                116,454Amortization
      of debt issue costs
                
                
                28,361
                
                
                
                44,172Amortization
      of debt discount
                
                
                12,000
                
                
                
                1,239,061Changes
      in deferred tax assets
                
                
                (2,654,946
                )
                
                
                -Excess
      tax benefits from stock-based compensation
                
                
                (879,579
                )
                
                
                -Equity
      method pick up from investment
                
                
                -
                
                
                
                653,231Write-off
      of deferred acquisition costs
                
                
                -
                
                
                
                96,954Loss
      on settlement of debt
                
                
                -
                
                
                
                20,121Loss
      on disposal of property and equipment
                
                
                -
                
                
                
                13,635Changes
      in operating assets and liabilities:Increase
      in accounts receivable
                
                
                (14,704,746
                )
                
                
                (4,144,746
                )Increase
      in prepaid expenses and other current assets
                
                
                (273,019
                )
                
                
                (38,414
                )Increase
      in other assets
                
                
                (515
                )
                
                
                (124,727
                )Increase
      in accounts payable
                
                
                5,645,429
                
                
                
                2,843,814Increase
      (decrease) in accrued expenses
                
                
                2,843,387
                
                
                
                (726,062
                )Increase
      in income taxes payable
                
                
                515,306
                
                
                
                -Increase
      in deferred rent
                
                
                14,635
                
                
                
                72,696Decrease
      in accrued interest
                
                
                (3,682
                )
                
                
                (19,225
                )Net
      cash used in operating activities
                
                
                (3,099,810
                )
                
                
                (4,151,028
                )Cash
      flows from investing activities:Purchases
      of property and equipment
                
                
                (215,777
                )
                
                
                (357,006
                )Proceeds
      from sales of property and equipment
                
                
                -
                
                
                
                13,000Proceeds
      from sale of available-for-sale securities
                
                
                34,393
                
                
                
                1,078,000Deferred
      acquisition costs
                
                
                -
                
                
                
                (10,619
                )Net
      cash (used in) provided by investing activities
                
                
                (181,384
                )
                
                
                723,375Cash
      flows from financing activities:Proceeds
      from common stock and warrants issued for cash, net of offering
      costs
                
                
                13,776,670
                
                
                
                2,912,500Excess
      tax benefits from stock-based compensation
                
                
                879,579
                
                
                
                -Proceeds
      from stock options exercised
                
                
                97,700
                
                
                
                -Proceeds
      from factor, net
                
                
                1,657,947
                
                
                
                2,550,720Proceeds
      from issuance of notes payable
                
                
                -
                
                
                
                1,300,000Principal
      payments on notes payable
                
                
                (400,000
                )
                
                
                (5,423,573
                )Principal
      payments on capital leases
                
                
                (10,615
                )
                
                
                (8,497
                )Net
      cash provided by financing activities
                
                
                16,001,281
                
                
                
                1,331,150Cash
      flows from discontinued operations:Cash
      flows from operating activities
                
                
                -
                
                
                
                (811,564
                )Cash
      flows from investing activities-acquisition
                
                
                -
                
                
                
                (1,885,624
                )Cash
      flows from investing activities-divestiture
                
                
                (250,000
                )
                
                
                1,302,079Net
      cash used in discontinued operations
                
                
                (250,000
                )
                
                
                (1,395,109
                )Net
      increase (decrease) in cash and cash equivalents
                
                
                12,470,087
                
                
                
                (3,491,612
                )Cash
      and cash equivalents at beginning of year
                
                
                183,871
                
                
                
                3,675,483Cash
      and cash equivalents at end of year
                
                $
                12,653,958
                
                
                $
                183,871





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


F-7





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


CONSOLIDATED
STATEMENTS OF CASH FLOWS





For
      the
                                              
                                              
                                              For
      theYear
      Ended
                                              
                                              
                                              Year
      EndedDecember 31, 2009
                                              
                                              
                                              December 31, 2008Supplemental
      disclosure of cash flow information:Interest
      paid
                                              
                                              $
                                              512,394
                                              
                                              
                                              $
                                              261,796Income
      taxes paid
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Non-cash
      investing and financing activities:Issuance
      of common stock to eliminate or modify price protection for
      warrants
                                              
                                              $
                                              508,497
                                              
                                              
                                              $
                                              -Property
      and equipment acquired through capitalized leases
                                              
                                              $
                                              491,007
                                              
                                              
                                              $
                                              -Reclassification
      of warrant derivative liability to equity upon expiration of price
      protection
                                              
                                              $
                                              357,435
                                              
                                              
                                              $
                                              -Unrealized
      gain (loss) on available-for-sale securities
                                              
                                              $
                                              197,704
                                              
                                              
                                              $
                                              (197,704
                                              )Issuance
      of common stock to pay accrued interest payable
                                              
                                              $
                                              13,266
                                              
                                              
                                              $
                                              -Issuance
      of common stock to extend debt maturity date
                                              
                                              $
                                              12,000
                                              
                                              
                                              $
                                              -Issuance
      of common stock and warrants in business combination
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              5,746,442Issuance
      of common stock and warrants in debt settlement
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              611,000Issuance
      of common stock for services rendered and to be rendered
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              189,000Issuance
      of shares in Options Media Group Holdings, Inc. to settle accounts
      payable
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              54,611





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




F-8


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Note 1. Nature of
Operations





Overview




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





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





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





interCLICK
is an online display advertising network powered by a proprietary
data-enrichment technology platform. The substantial majority of interCLICK’s
revenues are derived from agreements with advertising agencies that develop
digital media campaigns on behalf of branded advertisers. Such advertising
campaigns target online users on hundreds of website publishers across more than
a dozen product and service categories. Virtually all of the Company’s revenues
are generated in the United States.





All
references to the Company’s 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.





Merger
with Options Newsletter





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”).




Options
Acquisition began selling advertising space within free electronic newsletters
that were published and emailed to subscribers. Options Acquisition also
generated leads for customers by emailing its customers’ advertisements to
various email addresses from within the Options Acquisition database. Options
Acquisition was also an email service provider (“ESP”) and offered customers an
email delivery platform to create, send and track email campaigns. During the
period from January 4, 2008 to June 23, 2008 (date of disposition), the majority
of Options Acquisition’s revenue was derived from being an ESP, but Options
Acquisition continued to publish newsletters as well as email customer
advertisements on a cost per lead generated basis.





The
initial merger consideration with respect to the Options Merger (the “Options
Merger Consideration”) included $1.5 million in cash of which $150,000 was held
in escrow pending passage of deferred representation and warranty time period
and 500,000 shares of common stock valued at $11.44 per share. The total initial
purchase price was $7,395,362 and included cash of $1,500,000, 500,000 shares of
common stock valued at $5,717,273, legal fees of $73,920, valuation service fees
of $25,000, brokers’ fees of $50,000 and 5,000 warrants valued at $29,169 with
an exercise price of $11.14 per share. The shares of the Company’s stock issued
in conjunction with the Options Merger were subject to a 12-month
lockup.




In
addition to the initial merger consideration, the Company was obligated to pay
$1 million (the “Earn-Out”) if certain gross revenues were achieved for the one
year period subsequent to the Options Merger payable 60 days after the end of
each of the quarters starting with March 31, 2008. For the quarters ended March
31, 2008 and June 30, 2008, the Company incurred $279,703 and $221,743,
respectively, in Earn-Out. On September 30, 2008, the Company entered into a
settlement agreement with the seller whereby the Company agreed to pay the
remaining $498,554 of Earn-Out (See Note 12 “Settlement with Former Owner of
Options Newsletter”). The $1,000,000 Earn-Out increased the purchase price and
is included as an adjustment to goodwill in the purchase price allocation
below.


F-9


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





The
Company accounted for the acquisition utilizing the purchase method of
accounting. The results of operations of Options Acquisition were included in
the consolidated results of operations of the Company beginning on January 1,
2008. The operations from January 1, 2008 to January 4, 2008 were not material.
The net purchase price, including acquisition costs paid, and adjusted for the
total Earn-Out to be paid as part of the September 30, 2008 settlement with the
seller, was allocated to assets acquired and liabilities assumed as
follows:





Current
      assets (including cash of $41,424)
                    
                    $
                    58,153Property
      and equipment
                    
                    
                    112,289Other
      assets (Software)
                    
                    
                    67,220Goodwill
      (adjusted for Earn Out)
                    
                    
                    8,020,450Other
      Intangibles
                    
                    
                    660,000Liabilities
      assumed
                    
                    
                    (258,750
                    )Deferred
      tax liability
                    
                    
                    (264,000
                    )Net
      purchase price
                    
                    $
                    8,395,362





Intangible
assets acquired include customer relationships valued at $610,000 and $50,000
for a covenant not to compete. Goodwill is expected not to be deductible for
income tax purposes.





In
connection with the purchase of Options Acquisition, the Company executed a
three-year employment agreement with the former owner of Options Newsletter to
pay him $250,000 per year plus 150,000 stock options which were to vest
one-third at the end of each of three years and are exercisable at $2.00 per
share. On September 30, 2008, the Company entered into a settlement agreement
with the former owner whereby all 150,000 stock options became fully vested
immediately and exercisable as follows: 50,000 stock options became exercisable
as of January 15, 2009 and 100,000 stock options became exercisable as of
September 30, 2009 (See Note 12 “Settlement with Former Owner of Options
Newsletter”). Accordingly, the remaining unrecognized portion of the fair value
of the stock options of $962,829 was recognized and included in loss from
discontinued operations as of September 30, 2008 (See Note below).





Divestiture
of Options Newsletter





On June
23, 2008, the Company, as the sole stockholder of Options Acquisition entered
into an Agreement of Merger and Plan of Reorganization (the “Options
Divestiture”) by and among, Options Media Group Holdings, Inc. (“OPMG”), Options
Acquisition and Options Acquisition Corp., a newly formed, wholly owned Delaware
subsidiary of OPMG.





At the
closing of the Options Divestiture on June 23, 2008, the Company, as Options
Acquisition’s sole stockholder, received (i) 12,500,000 shares of OPMG’s stock
(the “OPMG shares”), (ii) $3,000,000 in cash and (iii) a $1,000,000 senior
secured promissory note receivable from OPMG (the “Note”). The OPMG shares were
valued at $3,750,000 using a price of $0.30 per share, which was based on a
private placement for OPMG shares that was occurring at the same time of the
Options Divestiture. The Note bore interest at 10%, was due December 23, 2008,
and was secured by a first priority security interest in OPMG and its active
subsidiaries’ assets. On July 18, 2008, OPMG paid the Company $1,006,164
representing the full principal and accrued interest on the Note.





The loss
from the Options Divestiture is included in loss on sale of discontinued
operations for the year ended December 31, 2008 and is calculated as
follows:


F-10





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Consideration
      received for sale:Cash
      consideration
                  
                  $
                  3,000,000Note
      receivable
                  
                  
                  1,000,00012.5
      million common shares of OPMG
                  
                  
                  3,750,000Total
      consideration received
                  
                  
                  7,750,000Less:
      net book value of subsidiary sold:Original
      purchase price (including Earn Out payments due)
                  
                  
                  8,395,362Asset
      contributed to Options Acquisition
                  
                  
                  350,000Advances
      to Options Acquisition
                  
                  
                  402,190Corporate
      allocation to Options Acquisition
                  
                  
                  661,156Equity
      method pick up from 1/1/08 to 6/23/08
                  
                  
                  (935,173
                  )Interest
      expense on payable and promissory note settlement liability from 9/30/08
      to 12/31/08
                  
                  
                  8,550Net
      book value of subsidiary sold June 23, 2008
                  
                  
                  8,882,085Loss
      on sale of discontinued operations before income taxes
                  
                  
                  (1,132,085
                  )Income
      tax provision
                  
                  
                  (2,439,597
                  )Loss
      on sale of discontinued operations, net of income taxes
                  
                  $
                  (3,571,682
                  )




Regarding
the net book value of the subsidiary sold, the asset contributed to Options
Acquisition in the above table consisted of an inventory of qualified data for
use by the Company in email advertising purchased from a customer for $350,000
and contributed to Options.




For tax
purposes, the Options Newsletter acquisition was treated as a tax free exchange
and the Company initially had a carryover tax basis of $238,000.  For
book reporting purposes, the acquisition was recorded at fair market value based
on the value of the Company's stock issued in exchange for Options Newsletter
stock.  Subsequent to the acquisition, the Company contributed assets to
Options Newsletter while operating losses were generated.  At the time of
the Options Divestiture, the Company’s book basis was approximately $7.2 million
greater than its tax basis, thus resulting in a provision (rather than a
benefit) for income tax purposes.


As a
result of the Options Divestiture and the cash proceeds received by the Company,
the Company paid down $2,750,000 of the balance on that certain promissory note
dated November 15, 2007 (the “Longview Notes”), among the Company, CAN, Desktop
(the “Subsidiaries”) and Longview Marquis Master Fund, L.P., (“Longview”). The
remaining balance of the Longview Notes as of June 23, 2008 (giving effect to
the increase in principal described under the “Amendment Agreement” below) was
$1,773,573. The Company had also pledged the OPMG shares to Longview, in order
to secure the remaining balance of the Longview Notes. As of September 30, 2008,
all principal and accrued interest on the Longview Notes had been repaid (See
Note 7).





On
September 30, 2008, the Company entered into a settlement agreement with the
former owner of Options Newsletter to settle all amounts due under the $1
million Earn-Out and his employment agreement whereby the Company agreed to pay
$600,000 upon execution of the settlement agreement and $500,000, paid in two
equal installments on October 30, 2008 and January 15, 2009. The $1,100,000 in
payments was discounted to a net present value of $1,090,230 using a discount
rate of 12%. In addition, all stock options previously granted to the former
owner became fully vested immediately. As a result of the settlement, the
additional loss from discontinued operations was $1,053,059 and the additional
loss on sale of discontinued operations was $507,104 for the year ended December
31, 2008. As of December 31, 2008, the balance of the payable and promissory
note settlement liability was $248,780. As of March 31, 2009, the Company had
paid the entire balance of the payable and promissory note settlement
liability.


F-11


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Note
2. Significant Accounting Policies





Use
of Estimates





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





Principles
of Consolidation





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





Segment
Information





Accounting
Standards Codification subtopic Segment Reporting 280-10 (“ASC 280-10”)
establishes standards for reporting information regarding operating segments in
annual financial statements and requires selected information for those segments
to be presented in interim financial statements. During 2009 and 2008, the
Company only operated in one segment; therefore, segment information has not
been presented.





Business
Combinations





The
Company accounted for acquisitions prior to January 1, 2009 utilizing the
purchase method of accounting. Accordingly, the total consideration paid,
including certain costs incurred to effect the transaction, was allocated to the
underlying assets and liabilities, based on their respective estimated fair
values. The excess of the purchase price over the estimated fair values of the
net assets acquired was recorded as goodwill. Determining the fair value of
certain acquired assets and liabilities, identifiable intangible assets in
particular, is subjective in nature and often involves the use of significant
estimates and assumptions including, but not limited to: estimates of revenue
growth rates, determination of appropriate discount rates, estimates of
advertiser and publisher turnover rates, and estimates of terminal values. These
assumptions are generally made based on available historical information.
Definite-lived identifiable intangible assets are amortized on a straight-line
basis, as this basis approximates the expected cash flows from the Company’s
existing definite-lived identifiable intangible assets. Business combinations
consummated after December 31, 2008 shall be accounted for under the acquisition
method specified in ASC Topic 805, “Business Combinations”.





Cash
and Cash Equivalents




The
Company considers all short-term highly liquid investments with an original
maturity at the date of purchase of three months or less to be cash equivalents.
There were no cash equivalents at December 31, 2009 and 2008.





Accounts
Receivable and Allowance for Doubtful Accounts Receivable




Trade
accounts receivables are non-interest bearing and are stated at gross invoice
amounts less an allowance for doubtful accounts receivable.


F-12





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Credit is
extended to customers based on an evaluation of their financial condition and
other factors. The Company generally does not require collateral or other
security to support accounts receivable. The Company performs ongoing credit
evaluations of its customers and maintains an allowance for potential bad
debts.




The
Company estimates its allowance for doubtful accounts by evaluating specific
accounts where information indicates the customers may have an inability to meet
financial obligations, such as bankruptcy proceedings and receivable amounts
outstanding for an extended period beyond contractual terms. In these cases, the
Company uses assumptions and judgment, based on the best available facts and
circumstances, to record a specific allowance for those customers against
amounts due to reduce the receivable to the amount expected to be collected.
These specific allowances are re-evaluated and adjusted as additional
information is received. The amounts calculated are analyzed to determine the
total amount of the allowance. The Company may also record a general allowance
as necessary.





Direct
write-offs are taken in the period when the Company has exhausted its efforts to
collect overdue and unpaid receivables or otherwise evaluate other circumstances
that indicate that the Company should abandon such efforts.





Advertising





The
Company conducts advertising for the promotion of its services. In accordance
with ASC Topic 720.35.25, advertising costs are charged to operations when
incurred. Advertising costs aggregated $208,270 and $107,163 for the years ended
December 31, 2009 and 2008, respectively.





Property
and Equipment





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





Category
                
                Depreciation TermComputer
      equipment
                
                3-5
      yearsSoftware
                
                3
      yearsFurniture
      and fixtures
                
                3-5
      yearsOffice
      equipment
                
                3-5
      years





Intangible
Assets





The
Company records the purchase of intangible assets not purchased in a business
combination in accordance with ASC Topic 350 “Intangibles - Goodwill and Other”
and records intangible assets acquired in a business combination in accordance
with ASC Topic 805 “Business Combinations”.




Customer
relationships are 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 results in accelerated amortization in which
the majority of costs is 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 being amortized over its
remaining life at acquisition date of six months.





Goodwill





As of
December 31, 2009, goodwill amounted to $7,909,571, all of which resulted from
the August 31, 2007 merger with Desktop. The Company tests goodwill for
impairment in accordance with the provisions of ASC Topic 350 “Intangibles -
Goodwill and Other”. Accordingly, goodwill is tested for impairment at least
annually at the reporting unit level or whenever events or circumstances
indicate that goodwill might be impaired. As of December 31, 2009, the Company
has determined its reporting units consisted of interCLICK and Desktop and
determined that no adjustment to the carrying value of goodwill was
required.


F-13


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Investment
in Available-For-Sale Marketable Securities





The
Company invests in various marketable equity instruments and accounts for such
investments in accordance with ASC Topic 320, “Investments – Debt and Equity
Securities”. Trading securities are carried at fair value, with any unrealized
gains and losses included in earnings. Available-for-sale securities are carried
at fair value, with unrealized gains and losses, net of tax, reported as a
separate component of stockholders' equity. Investments classified as
held-to-maturity are carried at amortized cost. In determining realized gains
and losses, the cost of the securities sold is based on the specific
identification method.





The
Company accounts for investments in which the Company owns more than 20% of the
investee, using the equity method in accordance with ASC Topic 323, "Investments
- Equity Method and Joint Ventures". Under the equity method, an investor
initially records an investment in the stock of an investee at cost, and adjusts
the carrying amount of the investment to recognize the investor's share of the
earnings or losses of the investee after the date of acquisition. The amount of
the adjustment is included in the determination of net income by the investor,
and such amount reflects adjustments similar to those made in preparing
consolidated statements including adjustments to eliminate intercompany gains
and losses, and to amortize, if appropriate, any difference between investor
cost and underlying equity in net assets of the investee at the date of
investment. The investment of an investor is also adjusted to reflect the
investor's share of changes in the investee's capital. Dividends received from
an investee reduce the carrying amount of the investment. A series of operating
losses of an investee or other factors may indicate that a decrease in value of
the investment has occurred which is other than temporary and which should be
recognized even though the decrease in value is in excess of what would
otherwise be recognized by application of the equity method.





Certain
securities that the Company may invest in may be determined to be
non-marketable. Non-marketable securities where the Company owns less than 20%
of the investee are accounted for at cost pursuant to ASC Topic
323.10.35.36.





Management
determines the appropriate classification of its investments at the time of
acquisition and reevaluates such determination at each quarterly balance sheet
date.





The
Company periodically reviews its investments in marketable and non-marketable
securities and impairs any securities whose value is considered non-recoverable.
The Company's determination of whether a security is other than temporarily
impaired incorporates both quantitative and qualitative information. GAAP
requires the exercise of judgment in making this assessment for qualitative
information, rather than the application of fixed mathematical criteria. The
Company considers a number of factors including, but not limited to, the length
of time and the extent to which the fair value has been less than cost, the
financial condition and near term prospects of the issuer, the reason for the
decline in fair value, changes in fair value subsequent to the balance sheet
date, and other factors specific to the individual investment. The Company's
assessment involves a high degree of judgment and accordingly, actual results
may differ materially from the Company's estimates and judgments.





Long-Lived
Assets





Management
evaluates the recoverability of the Company’s identifiable intangible assets and
other long-lived assets in accordance with ASC Topic 360, “Property Plant and
Equipment,” which generally requires the assessment of these assets for
recoverability when events or circumstances indicate a potential impairment
exists. Events and circumstances considered by the Company in determining
whether the carrying value of identifiable intangible assets and other
long-lived assets may not be recoverable include, but are not limited to:
significant changes in performance relative to expected operating results,
significant changes in the use of the assets, significant negative industry or
economic trends, a significant decline in the Company’s stock price for a
sustained period of time, and changes in the Company’s business strategy. In
determining if impairment exists, the Company estimates the undiscounted cash
flows to be generated from the use and ultimate disposition of these assets. If
impairment is indicated based on a comparison of the assets’ carrying values and
the undiscounted cash flows, the impairment loss is measured as the amount by
which the carrying amount of the assets exceeds the fair market value of the
assets.





Revenue
Recognition





The
Company recognizes revenue in accordance with ASC Topic 605, “Revenue
Recognition.” Accordingly, the Company recognizes revenue when the following
criteria have been met: persuasive evidence of an arrangement exists, the fees
are fixed or determinable, no significant Company obligations remain, and
collection of the related receivable is reasonably assured.


F-14


INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Revenues
consist of amounts charged to customers, net of discounts, credits and amounts
paid or due under revenue sharing arrangements, for actions on advertisements
placed on our publisher vendor’s websites. The Company’s revenue is recognized
in the period that the advertising impressions, click-throughs or actions occur,
when lead-based information is delivered or, provided that no significant
Company obligations remain, collection of the resulting receivable is reasonably
assured, and prices are fixed or determinable. Additionally, consistent with the
provisions of ASC Topic 605.45, the Company recognizes revenue as a principal.
Accordingly, revenue is recognized on a gross basis.





Cost
of Revenue





Cost of
revenue consists primarily of expenses for the purchase of advertising
impressions from publishers and third party data. The Company becomes obligated
to make payments related to such expenses in the period the advertising
impressions, click-throughs, actions or lead-based information are delivered or
occur. Such expenses are classified as cost of revenue in the corresponding
period in which the revenue is recognized in the accompanying statements of
operations.





Fair
Value Measurements





On
January 1, 2008, the Company adopted the provisions of ASC Topic 820, “Fair
Value Measurements and Disclosures”. ASC Topic 820 defines fair value as used in
numerous accounting pronouncements, establishes a framework for measuring fair
value and expands disclosure of fair value measurements. Excluded from the scope
of ASC Topic 820 are certain leasing transactions accounted for under ASC Topic
840, “Leases.” The exclusion does not apply to fair value measurements of assets
and liabilities recorded as a result of a lease transaction but measured
pursuant to other pronouncements within the scope of ASC Topic 820.





Income
Taxes





The
Company uses the asset and liability method of accounting for income taxes in
accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax
expense is recognized for the amount of: (i) taxes payable or refundable for the
current year, and (ii) deferred tax consequences of temporary differences
resulting from matters that have been recognized in an entity’s financial
statements or tax returns. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in the results of operations in the period that includes the
enactment date. A valuation allowance is provided to reduce the deferred tax
assets reported if, based on the weight of the available positive and negative
evidence, it is more likely than not some portion or all of the deferred tax
assets will not be realized. A liability (including interest if applicable) is
established in the consolidated financial statements to the extent a current
benefit has been recognized on a tax return for matters that are considered
contingent upon the outcome of an uncertain tax position. Applicable interest
and penalties are included as a component of income tax expense and income taxes
payable.





ASC Topic
740.10.30 clarifies the accounting for uncertainty in income taxes recognized in
an enterprise’s financial statements and prescribes a recognition threshold and
measurement attribute for the financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. ASC Topic
740.10.40 provides guidance on derecognition, classification, interest and
penalties, accounting in interim periods, disclosure, and transition. The
Company believes its tax positions are all highly certain of being upheld upon
examination. As such, the Company has not recorded a liability for unrecognized
tax benefits. As of December 31, 2009, the tax years 2006 through 2008 remain
open for IRS audit. The Company has received no notice of audit from the
Internal Revenue Service for any of the open tax years. We adopted the
provisions of ASC Topic 740 on our inception date of June 14, 2007.





The
Company follows the provisions of the predecessor to ASC Topic 740.10.25.09,
which provides guidance on how an entity should determine whether a tax position
is effectively settled for the purpose of recognizing previously unrecognized
tax benefits. The term “effectively settled” replaces the term “ultimately
settled” when used to describe recognition, and the terms “settlement” or
“settled” replace the terms “ultimate settlement” or “ultimately settled” when
used to describe measurement of a tax position under ASC Topic 740. Topic
740.10.25.09 clarifies that a tax position can be effectively settled upon the
completion of an examination by a taxing authority without being legally
extinguished. For tax positions considered effectively settled, an entity would
recognize the full amount of tax benefit, even if the tax position is not
considered more likely than not to be sustained based solely on the basis of its
technical merits and the statute of limitations remains open.


F-15





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Stock-Based
Compensation





The
Company recognizes compensation expense for stock-based compensation in
accordance with ASC Topic No. 718. For employee stock-based awards, the Company
calculates the fair value of the award on the date of grant using the
Black-Scholes method for stock options and the quoted price of the Company’s
common stock for unrestricted shares; the expense is recognized over the service
period for awards expected to vest. For non-employee stock-based awards, the
Company calculates the fair value of the award on the date of grant in the same
manner as employee awards, however, the awards are revalued at the end of each
reporting period and the prorata compensation expense is adjusted accordingly
until such time the nonemployee award is fully vested, at which time the total
compensation recognized to date shall equal the fair value of the stock-based
award as calculated on the measurement date, which is the date at which the
award recipient’s performance is complete. The estimation of stock-based awards
that will ultimately vest requires judgment, and to the extent actual results or
updated estimates differ from original estimates, such amounts are recorded as a
cumulative adjustment in the period estimates are revised. The Company considers
many factors when estimating expected forfeitures, including types of awards,
employee class, and historical experience.





Basic
and Diluted Earnings (Loss) Per Common Share





Basic
earnings (loss) per common share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding for the
period. Diluted earnings (loss) per share is computed using the weighted average
number of shares of common stock outstanding for the period, and, if dilutive,
potential shares outstanding during the period. Potential shares of common stock
consist of the incremental shares of common stock issuable upon the exercise of
stock options, stock warrants, nonvested shares of common stock, and convertible
debt instruments.





Reclassifications





Certain
amounts in the accompanying 2008 financial statements have been reclassified at
December 31, 2009. In particular, bad debt expense is now included in general
and administrative expenses. Merger, acquisition and divestiture costs are
now included in general and administrative expenses. Ad serving costs have been
reclassified from general and administrative costs to cost of revenues.
Whereas certain compensation costs (including stock-based compensation) had
been included in sales and marketing expenses, a portion of these
costs have been reclassified to either general and
adminstrative expenses or technology support expenses. Deferred
revenue is now included in accrued expenses. The following table shows the
reclassifications to the consolidated statement of operations for the year ended
December 31, 2008.




For
      the year ended December 31, 2008ReclassificationsMerger,Acquisition,
              
              
              
              
              
              CompensationAs
      Previously
              
              
              Bad
      Debt
              
              
              and
      Divestiture
              
              
              Ad
      Serving
              
              
              and
      Employee-
              
              
              AsReorted
              
              
              Expense
              
              
              Costs
              
              
              Costs
              
              
              Related
      Costs
              
              
              ReclassifiedRevenues
              
              $
              22,452,333
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              22,452,333Cost
      of Revenue
              
              
              15,344,337
              
              
              
              
              
              
              
              
              $
              289,759
              
              
              
              
              
              
              15,634,096Gross
      profit
              
              
              7,107,996
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              6,818,237Operating
      expenses:General
      and administrative
              
              
              6,269,070
              
              
              $
              414,737
              
              
              $
              652,104
              
              
              
              (289,759
              )
              
              $
              1,305,460
              
              
              
              8,351,612Sales
      and marketing
              
              
              4,884,973
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,490,220
              )
              
              
              3,394,753Technology
      support
              
              
              1,061,182
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              184,760
              
              
              
              1,245,942Amortization
      of intangible assets
              
              
              418,508
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              418,508Merger,
      acquisition and divestiture costs
              
              
              652,104
              
              
              
              
              
              
              
              (652,104
              )
              
              
              
              
              
              
              
              
              
              
              -Bad
      debt expense
              
              
              414,737
              
              
              
              (414,737
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -Total
      operating expenses
              
              
              13,700,574
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              13,410,815Operating
      loss from continuing operations
              
              $
              (6,592,578
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (6,592,578
              )





Comprehensive
Income (Loss)





Comprehensive
income (loss) includes net income (loss) as currently reported by the Company
adjusted for other comprehensive items. Other comprehensive items for the
Company consist of unrealized gains and losses related to the Company's equity
securities accounted for as available-for-sale with changes in fair value
recorded as a component of stockholders’ equity.





Discontinued
Operations





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





Accounting
for Derivatives





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


F-16





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Cumulative
Effect of Change in Accounting Principle





On
January 1, 2009, the Company determined that certain of its warrants previously
issued contain round-down protection (price protection) and such instruments are
not considered indexed to a company’s own stock because neither the occurrence
of a sale of shares of common stock by the Company at market nor the issuance of
another equity-linked instrument with a lower strike price is an input to the
fair value of a fixed-for-fixed option on equity shares. Accordingly, the
warrants with price protection qualify as derivatives and need to be separately
accounted for as a liability under ASC Topic 815. In accordance with ASC Topic
815, the cumulative effect of the change in accounting principle has been
applied retrospectively and has been recognized as an adjustment to the opening
balance of equity. The cumulative-effect adjustment amounts recognized in the
balance sheet as a result of the initial adoption of this policy were determined
based on the amounts that would have been recognized if the policy had been
applied from the issuance date of the instrument. As a result of the accounting
change, the accumulated deficit as of January 1, 2009 decreased from
$15,258,506, as originally reported, to $13,814,054 and additional paid-in
capital decreased from $24,908,509, as originally reported, to
$23,044,043.





Research
and Development





In
accordance with ASC Topic 730, “Research and Development”, expenditures for
research and development of the Company's technology are expensed when incurred,
and are included in operating expenses under Technology support. The Company
recognized research and development costs of $48,200 for the year ended December
31, 2009.





Codification
Update





In May
2009, the Financial Accounting Standards Board (“FASB”) issued an accounting
standard that became part of ASC Topic 855-10, “Subsequent Events” which
establishes general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or
are available to be issued. ASC Topic 855 sets forth (1) the period after the
balance sheet date during which management of a reporting entity should evaluate
events or transactions that may occur for potential recognition or disclosure in
the financial statements, (2) the circumstances under which an entity should
recognize events or transactions occurring after the balance sheet date in its
financial statements and (3) the disclosures that an entity should make about
events or transactions that occurred after the balance sheet date. ASC Topic 855
is effective for interim or annual financial periods ending after June 15, 2009.
The adoption of ASC Topic 855 did not have a material effect on the Company’s
consolidated financial statements.





In June
2009, the FASB issued an accounting standard ASC 105, “Generally Accepted
Accounting Principles”, whereby the FASB Accounting Standards Codification
(“ASC” or “Codification”) will be the single source of authoritative
nongovernmental U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative GAAP for
SEC registrants. ASC Topic 105 is effective for interim and annual periods
ending after September 15, 2009. All existing accounting standards are
superseded as described in ASC Topic 105. All other accounting literature not
included in the Codification is non-authoritative. The Codification did not have
a significant impact on the Company’s consolidated financial
statements.





In August
2009, the FASB issued Accounting Standards Update 2009-05, “Fair Value
Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value”.
ASU 2009-05 provided amendments to ASC 820-10, including clarification that in
circumstances in which a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using certain techniques. ASU 2009-05 also clarifies that when estimating the
fair value of a liability, a reporting entity is not required to include a
separate input or adjustment to other inputs relating to the existence of a
restriction that prevents the transfer of a liability. ASU 2009-05 also
clarifies that both a quoted price in an active market for the identical
liability at the measurement date and the quoted price for the identical
liability when traded as an asset in an active market when no adjustments to the
quoted price of the asset are required are Level 1 fair value measurements.
Adoption of ASU 2009-05 did not have a material impact on the Company’s
consolidated results of operations or financial condition.





In
October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue
Arrangements (amendments to FASB ASC Topic 605, Revenue Recognition)” (“ASU
2009-13”) and ASU 2009-14, “Certain Arrangements That Include Software Elements,
(amendments to FASB ASC Topic 985, Software)” (“ASU 2009-14”). ASU 2009-13
requires entities to allocate revenue in an arrangement using estimated selling
prices of the delivered goods and services based on a selling price hierarchy.
The amendments eliminate the residual method of revenue allocation and require
revenue to be allocated using the relative selling price method. ASU 2009-14
removes tangible products from the scope of software revenue guidance and
provides guidance on determining whether software deliverables in an arrangement
that includes a tangible product are covered by the scope of the software
revenue guidance. ASU 2009-13 and ASU 2009-14 should be applied on a prospective
basis for revenue arrangements entered into or materially modified in fiscal
years beginning on or after June 15, 2010, with early adoption permitted. The
Company does not expect adoption of ASU 2009-13 or ASU 2009-14 to have a
material impact on the Company’s consolidated results of operations or financial
condition.


F-17





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





In
January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and
Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements”.
This update provides amendments to Topic 820 that will 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 Company does not expect adoption of ASU 2010-06 to 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 Company does not expect
adoption of ASU 2010-09 to have a material impact on the Company’s consolidated
results of operations or financial condition.





Note
3. Accounts Receivable





Accounts
receivable consisted of the following at December 31, 2009 and
2008:





December31,2009
                  
                  
                  December31,2008Accounts
      receivable
                  
                  $
                  22,014,493
                  
                  
                  $
                  7,545,311Less:
      Allowance for doubtful accounts
                  
                  
                  (383,188
                  )
                  
                  
                  (425,000
                  )Accounts
      receivable, net
                  
                  $
                  21,631,305
                  
                  
                  $
                  7,120,311





As of
December 31, 2009 and 2008, we recorded an allowance for doubtful accounts of
$383,188 and $425,000, which represents an allowance percentage of 1.7% and 5.6%
of our gross accounts receivable balance of $22,014,493 and $7,545,311,
respectively.





Bad debt
expense was $193,752 and $414,737 for the years ended December 31, 2009 and
2008, respectively.





See also
Note 13 for concentrations of accounts receivable.





Note
4. Property and Equipment





Property
and equipment consisted of the following at December 31, 2009 and
2008:





December31,2009
                    
                    
                    December31,2008Computer
      equipment
                    
                    $
                    1,433,461
                    
                    
                    $
                    754,516Furniture
      and fixtures
                    
                    
                    72,711
                    
                    
                    
                    46,069Software
                    
                    
                    57,572
                    
                    
                    
                    56,375Office
      equipment
                    
                    
                    22,443
                    
                    
                    
                    22,4431,586,187
                    
                    
                    
                    879,403Accumulated
      depreciation
                    
                    
                    (597,288
                    )
                    
                    
                    (282,490
                    )Property
      and equipment, net
                    
                    $
                    988,899
                    
                    
                    $
                    596,913





Property
and equipment held under capitalized leases of $520,365 and $29,358 at December
31, 2009 and 2008, respectively, are included in Computer equipment above.
Depreciation expense for the years ended December 31, 2009 and 2008 was $314,798
and $245,489, of which $10,465 and $5,872 pertained to capitalized leases for
the years ended December 31, 2009 and 2008, respectively. Accumulated
depreciation amounted to $597,288 and $282,490, of which $17,152 and $6,687
pertained to capitalized leases, as of December 31, 2009 and 2008,
respectively.


F-18





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Note
5. Intangible Assets





Intangible
assets, which were all acquired from the Desktop business combination, consisted
of the following at December 31, 2009 and December 31, 2008:





December31,2009
                    
                    
                    December31,2008Customer
      relationships
                    
                    $
                    540,000
                    
                    
                    $
                    540,000Developed
      technology
                    
                    
                    790,000
                    
                    
                    
                    790,000Domain
      name
                    
                    
                    683
                    
                    
                    
                    6831,330,683
                    
                    
                    
                    1,330,683Accumulated
      amortization
                    
                    
                    (909,350
                    )
                    
                    
                    (720,570
                    )Intangible
      assets, net
                    
                    $
                    421,333
                    
                    
                    $
                    610,113





Customer
relationships are fully amortized as of December 31, 2009 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 as of December 31, 2009 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 December 31, 2009:





Year Ending December 31,2010
                    
                    $
                    158,0002011
                    
                    
                    158,0002012
                    
                    
                    105,333Total
                    
                    $
                    421,333




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





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





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





At the
closing of the Options Divestiture on June 23, 2008, the Company, as Options
Acquisition’s sole stockholder, received as part of the divestiture 12,500,000
shares of OPMG’s stock. The OPMG shares were valued at $3,750,000 using a price
of $0.30 per share, which was based on a private placement for OPMG shares that
was occurring at the same time of the Options Divestiture. From June 23, 2008
forward, the Company accounted for the investment in OPMG under the equity
method until September 18, 2008, at which time the Company’s ownership
percentage fell to below 20% and the Company lost significant influence and
control over the investee. From June 23, 2008 through September 18, 2008, the
Company recognized an aggregate of $653,231 of its proportionate share of the
investee losses. During that same period, the Company sold an aggregate of 4.7
million OPMG shares having a basis of $1,180,496 for proceeds of $1,034,000,
resulting in a loss of $146,496. On September 30, 2008, the Company gave to a
vendor 100,000 OPMG shares having a basis of $24,568 in order to settle $54,611
of accounts payable, resulting in a gain of $30,042.


F-19





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





In May
and November 2009, the Company sold an aggregate of 0.3 million OPMG shares
having a basis of $89,625 for proceeds of $34,392, resulting in a loss of
$55,233. While the OPMG closing stock price on December 31, 2009 was $0.07 per
share, management has deemed private transactions to be the most advantageous
market for orderly sales of the Company’s investment in OPMG. In November 2009,
and again in January 2010, the Company sold some of its shares of OPMG to an
unrelated third party for $0.10 per share. Accordingly, the Company has utilized
the $0.10 per share price from the November 2009 sale to value its remaining 7.2
million OPMG shares resulting in a fair value of $715,608 as of December 31,
2009. The Company has determined that the decline in the fair value of its
investment in OPMG below its cost basis is other than temporary as of December
31, 2009, based on the extent and length of time over which the market value has
been less than cost as well as due diligence inquiries the Company made relating
to OPMG’s prospects. Accordingly, the Company has recognized an other than
temporary impairment related to its investment in the OPMG shares of $1,042,470
in the accompanying consolidated statement of operations for the year ended
December 31, 2009. As a result of this determination, the Company maintains a $0
unrealized loss on available-for-sale equity securities in the stockholders’
section of the accompanying consolidated balance sheet.





Note
7. Notes Payable – Related Party, Factor Agreement and Capital Lease
Obligations





Notes
Payable – Related Party





Notes
payable – related party consisted of the following at December 31, 2009 and
2008:





December31,2009
                  
                  
                  December31,20086%
      Senior secured promissory note payable - related party
                  
                  $
                  -
                  
                  
                  $
                  400,000Less:
      Current maturities
                  
                  
                  -
                  
                  
                  
                  (400,000
                  )Amount
      due after one year
                  
                  $
                  -
                  
                  
                  $
                  -





In
November 2007, pursuant to a purchase agreement we sold senior secured
promissory notes (the “Longview Notes”) in the original aggregate principal
amount of $5,000,000. We received net proceeds in the amount of $4,500,000 net
of $500,000 of an Original Issue Discount upon the sale of the Longview Notes.
The Longview Notes were to mature on May 30, 2008 and bore interest at the rate
of 8% per annum, payable quarterly in cash. We used the net proceeds from the
sale of the Longview Notes first, to pay expenses and commissions related to the
sale of the Longview Notes and second, for the general working capital needs and
acquisitions of companies or businesses reasonably related to Internet marketing
and advertising. In addition, the Purchase Agreement contained certain customary
negative covenants, including, without limitation, certain restrictions (subject
to limited exceptions) on (i) the issuance of variable priced securities, (ii)
purchases and payments, (iii) limitations on prepayments, (iv) incurrence of
indebtedness, (v) sale of collateral, (vi) affiliate transactions and (vii) the
ability to make loans and investments.





In
consideration for the loan, the lender purchased 75,000 shares of common stock
at $0.02 per share from a third party stockholder of the Company. On such date,
the closing trading price of the Company's common stock on the Over-The-Counter
Bulletin Board was $10.70. The purchase of the shares of common stock at a
favorable price from such third party stockholder was a material inducement for
the loan. Accordingly, under U.S. GAAP, of the $4.5 million received by the
Company in connection with the sale of the senior notes to the lender, $802,500
was allocated to the value of the shares of common stock sold to the lender as
if such shares of common stock were contributed to the Company by the third
party and then reissued by the Company in connection with the
transactions.





The
resulting aggregate debt discount of $1,352,500 (consisting of the original
issue discount of $500,000, lender fees of $50,000 and the 75,000 shares of
common stock valued at $802,500) was being amortized to interest expense over
the original term of the debt through May 30, 2008. Amortization of the debt
discount for the year ended December 31, 2008 totaled $1,104,377, of which
$940,456 is included in interest expense and $163,921 is included in
discontinued operations.





On May 5,
2008, $611,111 of the $5,000,000 Longview Notes and was paid by the issuance of
152,750 shares of common stock and 76,375 five-year warrants exercisable at
$5.00 per share having an aggregate value of $611,000, which was based on a
private placement of similar securities of the Company occurring at the time of
settlement. The net book value of the debt at the date of settlement was
$588,404, resulting in a loss on settlement of $22,707 (consisting of the
unamortized debt discount at the date of settlement), of which $20,121 was
included in other income (expense) and $2,586 was included in loss from
discontinued operations.





In
addition, the Company incurred legal and other fees associated with the issuance
of the Longview Notes. Such fees of $91,437 were included in deferred debt issue
costs and were amortized to interest expense over the term of the debt.
Amortization of the deferred costs for the year ended December 31, 2008 totaled
$77,505, of which $66,134 is included in interest expense and $11,371 is
included in discontinued operations.


F-20





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





On May
30, 2008, the Company paid a one-time cash fee in the amount of $50,000 to
extend the maturity date on the Longview Notes from May 30, 2008 to June 13,
2008. Accordingly, $44,524 is included in interest expense and $5,476 is
included in discontinued operations for the year ended December 31,
2008.





On June
17, 2008, the Company paid a one-time cash fee in the amount of $50,000 (the
“Extension Amount”) to extend the maturity date on the Longview Notes from June
13, 2008 until June 20, 2008. The Extension Amount was credited against the
outstanding principal balance as a result of the Options
Divestiture.





On June
23, 2008, the Company utilized proceeds from the Options Divestiture in order to
pay $2,750,000 of the balance on the Longview Notes pursuant to an amendment
agreement. The remaining balance of the Longview Notes as of June 23, 2008
(giving effect to an increase in principal of $134,684 pursuant to an amendment
agreement) was $1,773,573. Also, the maturity date of the Longview Notes was
extended to August 30, 2008 and the interest rate was increased from 8% to 12%.
The Company also pledged its OPMG shares to Longview, in order to secure the
remaining balance of the Longview Notes. The resulting debt discount of $134,684
was amortized to interest expense over the term of the note. Amortization of the
new debt discount for the year ended December 31, 2008 was $134,684, all of
which is included in interest expense.





As of
September 30, 2008, all principal and accrued interest on the Longview Notes had
been repaid.





On
September 26, 2008, we sold senior secured promissory notes (the “GRQ Notes”) in
the original aggregate principal amount of $1,300,000 to one of our Co-Chairmen.
The GRQ Notes bore interest at the rate of 6% per annum and initially matured
December 31, 2008. We used the net proceeds from the sale of the GRQ Notes to
repay the Longview Notes. The Company pledged the OPMG shares as collateral on
the GRQ Notes. On November 26, 2008, the Company repaid $650,000 of the GRQ
Notes. On December 30, 2008, the Company and the noteholder entered into an
agreement whereby the noteholder agreed to extend the maturity date of the note
to June 30, 2009 (all other terms remained the same) provided the Company make a
principal payment of $250,000 on the remaining note by December 31, 2008. On
December 30, 2008, the Company made said payment, thus reducing the principal
balance to $400,000 and extending the maturity date to June 30,
2009.





On June
5, 2009, the Company and the noteholder agreed to extend the maturity date for
$100,000 of the notes payable from June 30, 2009 to December 31, 2009. In
exchange, this portion of the notes payable was converted to a 6% unsecured
convertible note, convertible at the rate of $4.00 per share. The modification
of this debt instrument was substantial and, therefore under GAAP, the debt was
deemed to be replaced with new debt. The conversion feature was the only
consideration given to the noteholder for the maturity date extension. As the
conversion feature’s exercise price exceeded the quoted trade price of the
underlying stock at the date of the modification, it did not have any intrinsic
value. Accordingly, the Company did not record any entries pertaining to the
aforementioned replacement of the noteholder’s debt. On September 29, 2009, the
entire principal amount of the convertible note payable of $100,000 was
repaid.





On June
22, 2009, the Company repaid $100,000 of the remaining $300,000 of senior
secured promissory note payable. In addition, the Company and the noteholder
agree to extend the maturity date for the remaining $200,000 of the notes
payable from June 30, 2009 to December 31, 2009. In exchange, the noteholder
received 5,000 shares of common stock having a fair value of $12,000, which was
treated as debt discount and was being amortized over the remaining term of the
debt. Additionally, the Company issued 5,528 shares of common stock in lieu of
cash as payment for $13,266 of accrued interest related to the notes payable. On
August 19, 2009, the entire principal amount of the senior secured note payable
of $200,000 was repaid along with a portion of the accrued interest of $1,874.
Accordingly, the remaining unamortized portion of the debt discount of $11,500
was recognized as interest expense at that time.





Accrued
interest related to above notes at December 31, 2009 and 2008 was $0 and
$16,948, respectively.





Factor
Agreement





The
Company factors its trade accounts receivable, with recourse, pursuant to a
revolving credit facility. In October 2008, the Company entered into a revolving
credit facility with Silicon Valley Bank (“Silicon”) to finance up to 80% of the
Company’s accounts receivable up to a maximum credit line of $3 million. The
Silicon credit facility had an interest rate equal to prime plus 2.0% and was
secured by all of the Company’s assets except property and equipment financed
elsewhere and the Company’s investment in OPMG shares, which had been pledged to
secure the GRQ Notes. Due to the recourse provision, the factoring arrangement
was accounted for as a secured borrowing. During 2008, the Company factored
approximately $2.5 million of its accounts receivable with Silicon, of which
approximately $2.0 million was received in advances. The Silicon facility was
repaid in 2008.


F-21





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





On
November 13, 2008, the Company entered into a revolving credit facility, in the
form of an Accounts Receivable Financing Agreement (the “Agreement”), with
Crestmark Commercial Capital Lending, LLC (“Crestmark”) to finance certain
eligible accounts receivable of the Company, as defined in the Agreement, up to
a maximum credit line of $3.5 million (subsequently increased to $4.5 million on
February 3, 2009, $5.5 million on April 30, 2009, and to $7.0 million on
September 2, 2009), which would represent gross factored accounts receivable
less a 20% reserve holdback by Crestmark. The Crestmark credit facility has an
interest rate equal to prime plus 1.0% (overall interest rate of 4.75% at
December 31, 2009) and is secured by all of the Company’s assets except property
and equipment financed elsewhere and the Company’s investment in OPMG shares.
 In addition, the Company pays a monthly fee (initially 0.575% and
decreased to 0.375% on September 2, 2009) per 30 days on each factored invoice
amount until the invoice is paid.  The Crestmark credit facility was
for an initial term of six months expiring May 12, 2009 (extended on March 3,
2009 for one year to May 12, 2010) and renews automatically unless terminated by
either party not less than 30 days and not more than 90 days prior to the next
anniversary date.  The balance due on the Crestmark credit facility at
December 31, 2009 was $4,208,667, which is net of the 20% reserve of $1,052,167
that is presented as Due from factor, a current asset.  The unused
amount under the line of credit available to the Company at December 31, 2009
was $2,791,333.  The average monthly balance due under the Crestmark
facility was $3,848,334 for the year ended December 31, 2009, and $2,203,240 for
the two months ended December 31, 2008 (as the credit facility began on November
13, 2008).





The
following is a summary of accounts receivable factored as well as factor fees
incurred for the years ended December 31, 2009 and 2008:





For the
                  
                  
                  For theYear Ended
                  
                  
                  Year EndedDecember 31, 2009
                  
                  
                  December 31, 2008Accounts
      receivable factored
                  
                  $
                  32,240,546
                  
                  
                  $
                  5,233,487Factoring
      fees incurred
                  
                  $
                  567,698
                  
                  
                  $
                  95,296





The
factoring fees for 2008 include a $20,000 early termination fee for the Silicon
credit facility.





Capital
Lease Obligations





In
December 2009, the Company purchased computer equipment for $215,400 through a
non-interest bearing capital lease agreement, payable in 36 installments of
$5,983.





In
December 2009, the Company purchased computer equipment for $275,607 through a
capital lease agreement, bearing interest of 6.34%, payable in 36 installments
of $8,405.





Capital
lease obligations consisted of the following at December 31, 2009 and
2008:





December31,2009
                  
                  
                  December31,2008Capital
      lease obligations
                  
                  $
                  500,502
                  
                  
                  $
                  20,110Less:
      Current maturities
                  
                  
                  (161,940
                  )
                  
                  
                  (10,615
                  )Amount
      due after one year
                  
                  $
                  338,562
                  
                  
                  $
                  9,495





Note 8. Net Earnings (Loss) per Share





Basic
earnings (loss) per share are computed using the weighted average number of
shares of common stock outstanding during the period.  Diluted
earnings (loss) per share are computed using the weighted average number of
common shares and potentially dilutive securities outstanding during the
period.  Potentially dilutive securities consist of the incremental
shares of common stock issuable upon exercise of stock options and warrants
(using the treasury stock method) as well as nonvested shares of common stock
and convertible debt.  The options, warrants and nonvested shares are
considered to be common stock equivalents and are only included in the
calculation of diluted earnings per common share when their effect is
dilutive.  Potentially dilutive securities are excluded from the
computation if their effect is anti-dilutive.  Accordingly,
potentially dilutive securities for the year ended December 31, 2008 have not
been included in the calculation of the diluted net loss per share as such
effect would have been anti-dilutive.  As a result, the basic and
diluted net loss per share amounts for the year ended December 31, 2008 are
identical.


F-22





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Components
of basic and diluted earnings per share for the year ended December 31, 2009
were as follows:





For the Year Ended December 31, 2009Income
                      
                      
                      Shares
                      
                      
                      Per-Share(Numerator)
                      
                      
                      (Denominator)
                      
                      
                      AmountNet
      income
                      
                      $
                      501,831Basic
      EPSIncome
      available to common stockholders
                      
                      $
                      501,831
                      
                      
                      
                      19,950,379
                      
                      
                      $
                      0.03Effect
      of Dilutive SecuritiesStock
      options
                      
                      
                      -
                      
                      
                      
                      944,006Warrants
                      
                      
                      -
                      
                      
                      
                      46,915Nonvested
      common stock
                      
                      
                      -
                      
                      
                      
                      8,589Convertible
      debt
                      
                      
                      1,907
                      
                      
                      
                      3,973Diluted
      EPSIncome
      available to common stockholders+
      assumed conversions
                      
                      $
                      503,738
                      
                      
                      
                      20,953,862
                      
                      
                      $
                      0.02





Options
to purchase 1,112,500 shares of common stock and warrants to purchase 573,750
shares of common stock were outstanding during the year ended December 31, 2009,
but were not included in the computation of diluted earnings per share because
the effects would have been anti-dilutive.  In addition, 42,500
nonvested shares were not included in the computation of diluted earnings per
share 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 2,518,394 shares of common stock and warrants to purchase 705,304
shares of common stock were outstanding during the year ended December 31, 2008,
but were not included in the computation of diluted loss per share because the
effects would have been anti-dilutive.





Note
9. Income Taxes





The
Company files a consolidated U.S. income tax return that includes its
U.S. subsidiary.  The amounts provided for income taxes are as
follows:





For the
                    
                    
                    For theYear Ended
                    
                    
                    Year EndedDecember31,2009
                    
                    
                    December31,2008Current
      (benefit) provision: federal
                    
                    $
                    972,373
                    
                    
                    $
                    (1,310,732
                    )Current
      (benefit) provision: state
                    
                    
                    422,511
                    
                    
                    
                    (376,573
                    )Total
      current provision
                    
                    
                    1,394,884
                    
                    
                    
                    (1,687,305
                    )Deferred
      (benefit) provision: federal
                    
                    
                    (1,143,912
                    )
                    
                    
                    -Deferred
      (benefit) provision: state
                    
                    
                    (504,159
                    )
                    
                    
                    -Deferred
      (benefit) provision relating to reduction of valuation
      allowance
                    
                    
                    (1,886,453
                    )
                    
                    
                    -Total
      deferred provision
                    
                    
                    (3,534,524
                    )
                    
                    
                    -Total
      benefit for income taxes from continuing operations
                    
                    $
                    (2,139,640
                    )
                    
                    $
                    (1,687,305
                    )




F-23




INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Significant
items making up the deferred tax assets and deferred tax liabilities as of
December 31, 2009 and 2008 are as follows:





December 31, 2009
                                  
                                  
                                  December 31, 2008Deferred
      tax assets:Accounts
      receivable
                                  
                                  $
                                  161,506
                                  
                                  
                                  $
                                  170,000Net
      operating loss carryforward
                                  
                                  
                                  436,701
                                  
                                  
                                  
                                  1,353,235Accrued
      compensation
                                  
                                  
                                  500,372
                                  
                                  
                                  
                                  -Amortization
      of warrants
                                  
                                  
                                  112,839
                                  
                                  
                                  
                                  107,088Depreciation
                                  
                                  
                                  140,342
                                  
                                  
                                  
                                  86,737Organizational
      costs
                                  
                                  
                                  85,547
                                  
                                  
                                  
                                  67,739Stock-based
      compensation
                                  
                                  
                                  2,171,423
                                  
                                  
                                  
                                  1,186,581Investment
      in Options Media
                                  
                                  
                                  405,813
                                  
                                  
                                  
                                  -Deferred
      rent
                                  
                                  
                                  36,387
                                  
                                  
                                  
                                  29,078Investment
      in OPMG
                                  
                                  
                                  601,065
                                  
                                  
                                  
                                  160,918Alternative
      minimum tax credit carryforward
                                  
                                  
                                  92,795
                                  
                                  
                                  
                                  -4,744,790
                                  
                                  
                                  
                                  3,161,376Less:
      valuation allowance
                                  
                                  
                                  (1,006,878
                                  )
                                  
                                  
                                  (2,893,330
                                  )Total
      deferred tax assets
                                  
                                  
                                  3,737,912
                                  
                                  
                                  
                                  268,046Deferred
      tax liabilities:Acquired
      intangible assets-amortization
                                  
                                  
                                  (202,873
                                  )
                                  
                                  
                                  (268,046
                                  )Total
      deferred tax liabilities
                                  
                                  
                                  (202,873
                                  )
                                  
                                  
                                  (268,046
                                  )Total
      net deferred tax assets
                                  
                                  $
                                  3,535,039
                                  
                                  
                                  $
                                  -





The
deferred tax assets have been presented in the accompanying consolidated balance
sheets as follows:





December 31, 2009
                        
                        
                        December 31, 2008Deferred
      taxes, current portion
                        
                        $
                        955,471
                        
                        
                        $
                        -Deferred
      taxes, net of current portion
                        
                        
                        2,579,568
                        
                        
                        
                        -Net
      deferred tax assets
                        
                        $
                        3,535,039
                        
                        
                        $
                        -





A
valuation allowance is established if it is more likely than not that all or a
portion of the deferred tax asset will not be realized.  Accordingly, a
valuation allowance was established in 2008 for the full amount of our deferred
tax assets due to the uncertainty of realization.  For 2009, the Company
utilized approximately $4.6 million of net operating loss
carryforwards.  Management believes that based upon its projection of
future taxable operating income for the foreseeable future, it is more likely
than not that the Company will be able to realize the tax benefit associated
with  deferred tax assets.  However, certain deferred tax assets
relate to investment transactions for which management does not believe that it
is more likely than not that the related deferred tax assets will be realized
and, therefore, a full valuation allowance has been established on those assets
as of December 31, 2009.  The net change in the valuation allowance
during the years ended December 31, 2009 and 2008 was a decrease of $1,886,452
and an increase of $1,940,945, respectively.





At
December 31, 2009, the Company had $1,176,784 of net operating loss
carryforwards which will expire from 2027 to 2028.  At December 31,
2009, the Company had $92,795 of alternative minimum tax credit carryforwards
which do not expire.





The
Company’s effective income tax expense (benefit) differs from the statutory
federal income tax rate of 34% as follows:


F-24





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





For the
                                
                                
                                For theYear Ended
                                
                                
                                Year EndedDecember 31, 2009
                                
                                
                                December 31, 2008Federal
      tax rate applied to loss before income taxes
                                
                                
                                -34.0
                                %
                                
                                
                                -34.0
                                %Meals
      and entertainment
                                
                                
                                5.9
                                %
                                
                                
                                -0.8
                                %Warrant
      derivative liability expense
                                
                                
                                13.8
                                %
                                
                                
                                -State
      income taxes
                                
                                
                                -3.2
                                %
                                
                                
                                -6.0
                                %Change
      in valuation allowance
                                
                                
                                -115.2
                                %
                                
                                
                                21.8
                                %Other
                                
                                
                                2.0
                                %
                                
                                
                                -Income
      tax expense (benefit)
                                
                                
                                -130.7
                                %
                                
                                
                                -19.0
                                %





As part
of the allocation of purchase price associated with the Desktop Merger (see Note
1), a deferred tax liability of $556,000 was established as a result of
differences between the book and tax basis of acquired intangible
assets.





As part
of the allocation of the purchase price associated with the Options Merger (see
Note 1), a deferred tax liability of $264,000 was established as a result of
differences between the book and tax basis of acquired intangible
assets.  Upon completion of the Options Divestiture, the entire
deferred tax liability was recognized as a deferred tax benefit in operations,
which ultimately increased the loss on sale from discontinued operations and
decreased the loss from discontinued operations.





As a
result of certain realization requirements under ASC Topic 718, the table of
deferred tax assets and liabilities shown above does not include certain
deferred tax assets at December 31, 2008 that arose directly from tax deductions
related to equity compensation in excess of compensation recognized for
financial reporting purposes.  Additional paid-in capital increased by
$879,579 as a result of the realization of these deferred tax assets during the
year ended December 31, 2009.  The Company uses tax law ordering for
purposes of determining when excess tax benefits have been
realized.  Under the tax law ordering method, a company looks to the
provisions within the tax law for determining the sequence in which the net
operating losses are utilized for tax purposes.





Note
10. 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
December 31, 2009 and December 31, 2008.





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 23,632,707 and
18,922,596 shares were issued and outstanding at December 31, 2009 and 2008,
respectively.  At the Company’s 2009 annual meeting that was held on
October 23, 2009, the stockholders of the Company voted to approve a 1 for 2
reverse stock split of the Company’s common stock.  Each stockholder
entitled to a fractional share as a result of the reverse stock split received a
full share in lieu of any such fractional share.  Accordingly, all
share amounts have been retroactively restated to reflect the reverse stock
split.





On
January 4, 2008, the Company issued 500,000 shares of common stock valued at
$5,717,273, and 5,000 five-year warrants valued at $29,169 with an exercise
price of $11.14 per share as part of the consideration to purchase Options
Acquisition.  On June 23, 2008, Options Acquisition was sold and all
related activity has been reclassified to discontinued operations
accordingly.





During
the period from March 28, 2008 through April 1, 2008, the Company sold to
various investors (i) 150,000 shares of common stock and (ii) five-year warrants
to purchase 75,000 shares of common stock at an exercise price of $5.50 per
share for gross proceeds of $750,000 ($5.00 per unit), of which $25,000 was paid
in finder’s fees.  Until the earlier of 24 months from the closing
date or such date there is an effective registration statement on file with the
SEC covering the resale of all of the shares and the shares underlying the
warrants, the shares and warrants have price protection at a price less than
$5.00 per share.  The price protection was waived by the investors in
2009 (see below).





During
the period from April 30, 2008 through July 17, 2008, the Company sold to
various investors (i) 562,500 shares and (ii) five-year warrants to purchase
281,250 shares at an exercise price of $5.00 per share for gross proceeds of
$2,250,000 ($4.00 per unit), of which $62,500 and five-year warrants to purchase
5,900 shares at an exercise price of $5.00 per share was paid in finder’s
fees.  Until the earlier of 24 months from the closing date or such
date there is an effective registration statement on file with the SEC covering
the resale of all of the shares and the shares underlying the warrants, the
shares and warrants had price protection at a price less than $4.00 per
share.  This price protection was waived by the investors and certain
of the placement agents (see below).


F-25





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





On April
30, 2008, as a result of the issuance by the Company of shares at a price below
$5.00 per share and warrants at an exercise price below $5.50 per share, the
Company issued an additional 37,500 shares and five-year warrants to purchase
7,500shares of
common stock at an exercise price of $5.00 per share, pursuant to price
protection clauses contained within the subscription agreements.  In
addition, the five-year warrants to purchase 75,000 shares at an exercise price
of $5.50 per share were also repriced to $5.00 per share.  As the
additional issuances of equity instruments stemmed from a capital transaction,
there is no effect on the accompanying consolidated statement of
operations.  Accordingly, the activity was recorded by an increase in
common stock of $37 with a corresponding decrease in additional paid-in
capital.





On May 5,
2008, the Company settled $611,111 of the original $5,000,000 Longview Notes
payable by issuance of 152,750 shares of common stock and five-year warrants to
purchase 76,375 shares of common stock at an exercise price of $5.00 per share
having an aggregate value of $611,000, which was based on a private placement
price of $4.00 per unit for similar securities occurring at the time of
settlement.  The net book value of the debt at the date of settlement
was $588,404, resulting in a loss on settlement of $22,707, of which $20,121 was
included in other income (expense) and $2,586 was included in loss from
discontinued operations.





On May
28, 2008, the Company issued 30,000 shares of common stock having a fair value
of $189,000 (based on a quoted trading price of $6.30 per share) to an investor
relations firm in exchange for services to be rendered over a three-month
period.  Accordingly, $189,000 has been expensed during the year ended
December 31, 2008.





During
the year ended December 31, 2008, the Company amortized $178,481 of deferred
equity-based expense related to warrants.





During
the period from May 18, 2009 through June 17, 2009, the Company entered into
separate agreements with investors that had purchased equity units in the
Company during 2008.  These equity units had consisted of shares of
common stock and warrants to purchase shares of common stock, both of which
contained price protection clauses.  As a result of these agreements,
the Company issued 352,500 shares in exchange for (i) the elimination of price
protection on 650,000 shares, (ii) the elimination of price protection on
warrants to purchase 314,940 shares and (iii) the repricing of warrants to
purchase 272,565 shares from an exercise price of $5.00 per share to $2.80 per
share.  Accordingly, the warrant derivative liability was valued at
the date of the agreements relinquishing the price protection clauses and the
difference was recorded as warrant derivative liability expense in the
accompanying statements of operations.  As a result of the shares
issued in connection with the elimination of round-down protection for the
warrants, an additional $150,514 was recorded to warrant derivative liability
expense in the accompanying statements of operations. Then, the pertinent
portion of the warrant liability of $508,497 was reclassified to equity by an
increase in common stock of $352 and an increase in additional paid-in capital
of $508,145.





On June
1, 2009, the Company issued 75,000 shares to a consultant for services to be
rendered over a 12-month period.  Accordingly, the Company has
recognized stock-based compensation of $228,902 for the year ended December 31,
2009.




On June
22, 2009, the Company issued 5,000 shares having a fair value of $12,000 in
order to extend the maturity date for a portion of its notes payable – related
party (see Note 7).  Additionally, the Company issued 5,528 shares to
settle $13,266 of accrued interest related to the notes payable – related party
(see Note 7).





On June
22, 2009, the Company closed a private placement whereby the Company sold to
four investors (one of whom was a co-chairman of the Company’s Board of
Directors) (i) 1,250,000 shares and (ii) three-year warrants to purchase 312,500
shares of common stock at an exercise price of $2.80 per share for gross
proceeds of $2,500,000.  We paid a broker-dealer  $243,000
and issued three-year warrants to purchase 112,500 shares of common stock at an
exercise price of $2.80 per share.  As part of the private placement,
the Company agreed to file a registration statement within 60 days of closing
and have the registration statement declared effective within 120 days of
closing, subject to liquidated damages.  On August 21, 2009, the
Company filed the registration statement, which then became effective on August
31, 2009.  As a result, no liquidated damages are due or shall become
due regarding the registration rights.





On
December 18, 2009, the Company completed a registered public offering whereby
the Company sold 2,875,000 shares of common stock for gross proceeds of
$12,937,500, of which $1,417,830 was paid in direct placement costs, resulting
in net proceeds of $11,519,670.


F-26





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





On
December 24, 2009, 2,500 restricted shares of common stock were granted (to
be issued at December 31, 2009) to a consultant and will vest May 30,
2010.  Accordingly, the Company has recognized stock-based
compensation of $563 for the year ended December 31, 2009.





During
the year ended December 31, 2009, proceeds of $97,700 were received and an
aggregate of 66,458 shares were issued as a result of stock option
exercises.





Stock
Warrants




In
addition to the warrants issued with shares of common stock (see above), on
October 7, 2009, as part of a consulting agreement, the Company issued to a
consultant three-year warrants to purchase 150,000 shares of common stock
exercisable at $4.24 per share for services to be rendered over a 12-month
period.  Accordingly, the Company has recognized stock-based
compensation of $261,977 for the year ended December 31, 2009.





A summary
of the Company’s warrant activity during the year ended December 31, 2009 is
presented below:





WeightedWeighted
                              
                              
                              AverageAverage
                              
                              
                              Remaining
                              
                              
                              AggregateNumber of
                              
                              
                              Exercise
                              
                              
                              Contractual
                              
                              
                              IntrinsicWarrants
                              
                              Shares
                              
                              
                              Price
                              
                              
                              Term
                              
                              
                              ValueBalance
      Outstanding, December 31, 2008
                              
                              
                              705,304
                              
                              
                              $
                              3.79Granted
                              
                              
                              581,505
                              
                              
                              $
                              3.16Exercised
                              
                              
                              -
                              
                              
                              
                              -Forfeited
                              
                              
                              -
                              
                              
                              
                              -Expired
                              
                              
                              -
                              
                              
                              
                              -Balance
      Outstanding, December 31, 2009
                              
                              
                              1,286,809
                              
                              
                              $
                              3.51
                              
                              
                              
                              2.9
                              
                              
                              $
                              -Exercisable,
      December 31, 2009
                              
                              
                              1,086,809
                              
                              
                              $
                              3.44
                              
                              
                              
                              2.9
                              
                              
                              $
                              -





Certain
of the Company’s warrants contain round-down protection (price protection),
which caused the warrants to be treated as derivatives (see Note
11).  The fair value of the warrant derivative liability was $69,258
as of December 31, 2009 and has been recorded as a liability in the accompanying
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 $515,176
during the year ended December 31, 2009 has been recorded in the accompanying
consolidated statement of operations as warrant derivative liability
expense.  Due to the aforementioned price protection, warrants to
purchase an aggregate of 6,505 and 4,279 shares of common stock were issued
during the years ended December 31, 2009 and 2008,
respectively.  During the year ended December 31, 2009, price
protection expired for certain warrants containing said provision requiring
$357,435 of the warrant derivative liability to be reclassified to additional
paid-in capital.  As of December 31, 2009, 15,494 warrants are
outstanding that continue to have price protection, at an exercise price of
$1.52 per share, for which the price protection shall expire in the second
quarter of 2010.





Stock
Incentive Plan and Stock Option Grants to Employees and Directors





The
Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “Plan”)
that provides for the grant of up to 2,250,000 shares of common stock and/or
options to purchase shares of common stock to directors, employees and
consultants.  As of December 31, 2009, there were no shares available for
future issuance under the Plan.





On
November 13, 2007, the Company adopted the 2007 Incentive Stock and Award Plan
(the “2007 Award Plan”), that provided for the grant of up to
500,000 shares of common stock and/or options to purchase shares of common
stock to directors, employees and consultants and in order to provide a means
whereby employees, officers, directors and consultants of the Company and its
affiliates and others performing services to the Company may be given an
opportunity to purchase shares of common stock of the Company.  On
February 6, 2009, the Company increased the number of shares of common stock
eligible for grant under the 2007 Award Plan from 500,000 to 612,500
shares.  On June 5, 2009, the Company increased the number of shares
eligible for grant under the 2007 Award Plan from 612,500 to 1,862,500
shares.  On July 27, 2009, the Company increased the number of shares
eligible for grant under the 2007 Award Plan from 1,862,500 to 2,112,500
shares.  On September 24, 2009, the Company increased the number of
shares eligible for grant under the 2007 Award Plan from 2,112,500 to 3,112,500
shares. The 2007 Award Plan shall be administered by a committee consisting of
two or more independent, non-employee and outside directors.  In the
absence of such a committee, the Board of Directors of the Company shall
administer such plan.


F-27





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





The
material terms of each option granted pursuant to the 2007 Award Plan by the
Company shall contain the following terms: (i) that the purchase price of each
share purchasable under an incentive option shall be determined by the Committee
at the time of grant, but shall not be less than 100% of the Fair Market Value
(as defined in the 2007 Award Plan) of such common share on the date the option
is granted, (ii) the term of each option shall be fixed by the Committee, but no
option shall be exercisable more than 10 years after the date such option is
granted and (iii) in the absence of any option vesting periods designated by the
Committee at the time of grant, options shall vest and become exercisable as to
one-third of the total number of shares subject to the option on each of the
first, second and third anniversaries of the date of grant.





On
September 23, 2008, 731,250 stock options issued (during 2008) to 22 employees,
having exercise prices from $5.90 to $6.02 per share, were repriced to an
exercise price of $2.62 per share, resulting in an additional fair value of
$380,250, which is being recognized over the remaining vesting
periods.




During
the year ended December 31, 2008, the Company granted 951,250 stock options, of
which 150,000 were granted to the former owner of Options Newsletter,
exercisable at $2.00 per share, and the remaining options were each exercisable
at the fair value of the common stock on the respective grant dates ranging from
$2.62 to $6.02 per share.  The options vest pro rata over two to four years
and expire five years from the grant date.





During
the year ended December 31, 2009, the Company granted 2,800,000 stock options,
of which 2,650,000 were under the Award Plan, at various exercise prices ranging
from $1.52 to $5.69 per share.  Of the options granted, 110,000 vested
immediately and the remaining 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 year
ended December 31, 2009 and 2008 was $7,089,875 and $3,505,840, respectively,
which is being recognized over the respective vesting periods.  The Company
recorded compensation expense of $2,632,870 and $2,695,528 for the years ended
December 31, 2009 and 2008, respectively, in connection with these stock
options.





As of
December 31, 2009, 350,208 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
years ended December 31, 2009 and 2008:





For the
                      
                      
                      For theYear Ended
                      
                      
                      Year EndedAssumptions
                      
                      December 31, 2009
                      
                      
                      December 31, 2008Expected
      life (years)
                      
                      
                      3.5
      - 5.0
                      
                      
                      
                      5.0Expected
      volatility
                      
                      
                      111.0%
      - 121.4
                      %
                      
                      
                      52.8%
      - 80.0
                      %Weighted-average
      volatility
                      
                      
                      118.4
                      %
                      
                      
                      60.5
                      %Risk-free
      interest rate
                      
                      
                      1.89%
      - 2.86
                      %
                      
                      
                      3.03%
      - 3.73
                      %Dividend
      yield
                      
                      
                      0.00
                      %
                      
                      
                      0.00
                      %Expected
      forfeiture rate
                      
                      
                      4.1
                      %
                      
                      
                      5.2
                      %


F-28





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





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 year ended December 31, 2009 is presented below:





WeightedWeighted
                              
                              
                              AverageAverage
                              
                              
                              Remaining
                              
                              
                              AggregateNumber
      of
                              
                              
                              Exercise
                              
                              
                              Contractual
                              
                              
                              IntrinsicOptions
                              
                              Shares
                              
                              
                              Price
                              
                              
                              Term
                              
                              
                              ValueBalance
      Outstanding, December 31, 2008
                              
                              
                              2,518,394
                              
                              
                              $
                              2.19Granted
                              
                              
                              2,800,000
                              
                              
                              $
                              3.13Exercised
                              
                              
                              (97,500
                              )
                              
                              $
                              2.35Forfeited
                              
                              
                              (168,750
                              )
                              
                              $
                              2.80Expired
                              
                              
                              (57,977
                              )
                              
                              $
                              2.00Balance
      Outstanding, December 31, 2009
                              
                              
                              4,994,167
                              
                              
                              $
                              2.69
                              
                              
                              
                              3.8
                              
                              
                              $
                              12,694,734Expected
      to vest, December 31, 2009
                              
                              
                              4,811,475
                              
                              
                              $
                              2.68
                              
                              
                              
                              3.8
                              
                              
                              $
                              12,310,983Exercisable,
      December 31, 2009
                              
                              
                              1,824,166
                              
                              
                              $
                              2.13
                              
                              
                              
                              3.2
                              
                              
                              $
                              5,663,786





The
weighted-average grant-date fair value of options granted to employees during
the year ended December 31, 2009 and 2008 was $2.53 and $3.98,
respectively.  The total intrinsic value of options exercised by
employees during the year ended December 31, 2009 was $203,025.  The
Company expects 3,028,913 of all outstanding employee stock options to
eventually vest.





Nonvested
Common Stock Grants to Employees





On
February 27, 2009, the Company granted 28,125 restricted shares of common
stock having a fair value of $56,250 (based on a quoted trading price of $2.00
per share) to an officer.  The shares were issued under the 2007
Award Plan and vest in equal increments over a four-year period each
June 30 and December 31 commencing June 30, 2009, subject to continued
employment by the Company.  Effective September 30, 2009, the
remaining nonvested shares shall vest in equal increments
quarterly.





On August
7, 2009, the Company granted 10,000 restricted shares of common stock having a
fair value of $37,400 (based on a quoted trading price of $3.74 per share) to an
officer.  The shares were issued under the 2007 Award Plan and vested
in six months, subject to continued employment by the Company.





On
October 20, 2009, the Company granted an aggregate of 42,500 restricted shares
of common stock having a fair value of $230,350 (based on a quoted trading price
of $5.42 per share) to employees.  The shares were issued under the
2007 Award Plan and vest annually over a three year period, subject to continued
employment by the Company.





During
the year ended December 31, 2009, the Company recognized an aggregate amount of
$55,553 of stock-based compensation for nonvested shares of common stock issued
to employees.


F-29





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





WeightedAverageNumber of
                          
                          
                          Grant DateNonvested Shares
                          
                          Shares
                          
                          
                          Fair ValueNonvested
      at December 31, 2008
                          
                          
                          -
                          
                          
                          
                          -Granted
                          
                          
                          80,625
                          
                          
                          $
                          4.02Vested
                          
                          
                          (7,031
                          )
                          
                          $
                          2.00Forfeited
                          
                          
                          -
                          
                          
                          
                          -Nonvested
      at December 31, 2009
                          
                          
                          73,594
                          
                          
                          $
                          4.21





The total
fair value of shares vested to employees during the year ended December 31, 2009
was $24,976.





As of
December 31, 2009, there was $7,515,329 of total unrecognized compensation costs
related to nonvested share-based compensation arrangements.  That cost
is expected to be recognized over a weighted-average period of 1.2
years.





Other
Stock-Based Option Awards to Nonemployees





On July
10, 2009, the Company granted options to purchase an aggregate of 150,000 shares
of common stock to a member of its advisory board.  The options vest
in equal increments quarterly over a four-year period commencing September 30,
2009.  Accordingly, the Company has recognized stock-based compensation of
$214,434 for the year ended December 31, 2009.





Note
11. Fair Value of Financial Instruments





The
estimated fair value of certain financial instruments, including cash and cash
equivalents, 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.





On
January 1, 2009, we adopted a newly issued accounting standard for fair
value measurements of all nonfinancial assets and nonfinancial liabilities not
recognized or disclosed at fair value in the financial statements on a recurring
basis.  The accounting standard for those assets and liabilities did
not have a material impact on our financial position, results of operations or
liquidity.  We did not have any significant nonfinancial assets or
nonfinancial liabilities that would be recognized or disclosed at fair value on
a recurring basis as of December 31, 2009.





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





We
classify assets and liabilities measured at fair value in their entirety based
on the lowest level of input that is significant to their fair value
measurement.  Assets and liabilities measured at fair value on a recurring
basis consisted of the following at December 31, 2009:


F-30





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Total CarryingValue at
                          
                          
                          Fair Value Measurements at December 31, 2009December 31, 2009
                          
                          
                          (Level 1)
                          
                          
                          (Level 2)
                          
                          
                          (Level 3)Assets:Investment
      in available-for-sale marketable securities
                          
                          $
                          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
consolidated statements of operations (See Note 6 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 consolidated statements of operations.  Gains
(losses) recognized on the warrant derivative liability are included in other
income (expense) in the accompanying consolidated statements of
operations.





The
Company estimates the fair value of the warrant derivative liability utilizing
the Black-Scholes option pricing model, which is dependent upon several
variables such as the contractual warrant term, expected volatility of our stock
price over the contractual warrant term, expected risk-free interest rate over
the contractual warrant term, and the expected dividend yield rate over the
contractual warrant term.  The Company believes this valuation
methodology is appropriate for estimating the fair value of the warrant
derivative liability.  The following table summarizes the assumptions
the Company utilized to estimate the fair value of the warrant derivative
liability at December 31, 2009:





Assumptions
                        
                        December 31, 2009Expected
      life (years)
                        
                        
                        3.4Expected
      volatility
                        
                        
                        110.5
                        %Risk-free
      interest rate
                        
                        
                        1.70
                        %Dividend
      yield
                        
                        
                        0.00
                        %





The
expected term is based on the contractual term.  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 warrant at the time of the grant.  Dividend yield
is based on historical trends.  While the Company believes these
estimates are reasonable, the fair value would increase if a higher expected
volatility was used, or if the expected dividend yield increased.





There
were no changes in the valuation techniques during the three months ended
December 31, 2009.





Note
12. Commitments and Contingencies





Capital
Leases





The
following is a schedule by years of future minimum lease payments under capital
leases together with the present value of the net minimum lease payments as of
December 31, 2009:





Year
      ending December 31,2010
                        
                        $
                        176,4302011
                        
                        
                        172,6552012
                        
                        
                        172,6552013
                        
                        
                        5,985Total
      minimum lease payments
                        
                        
                        527,725Less:
      Amount representing interest
                        
                        
                        (27,223
                        )Present
      value of net minimum lease payments
                        
                        $
                        500,502


F-31





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Operating
Leases





The
Company leases office facilities and equipment under long-term operating lease
agreements with various expiration dates and renewal options.  The
following is a schedule by years of future minimum rental payments required
under operating leases that have initial or remaining noncancelable lease terms
in excess of one year as of December 31, 2009:





Year
      ending December 31,2010
                      
                      $
                      605,7002011
                      
                      
                      675,2252012
                      
                      
                      654,0682013
                      
                      
                      497,9402014
                      
                      
                      494,641Later
      years
                      
                      
                      21,972Total
      minimum payments required*
                      
                      $
                      2,949,546





*Minimum
payments have not been reduced by minimum sublease rentals of $219,143 due in
the future under noncancelable subleases.





The
following schedule shows the composition of total rental expense for all
operating leases except those with terms of a month or less that were not
renewed:





Year Ended December 31,2009
                          
                          
                          2008Minimum
      rentals
                          
                          $
                          594,530
                          
                          
                          $
                          347,560Less:
      Sublease rentals
                          
                          
                          (48,902
                          )
                          
                          
                          -Total
                          
                          $
                          545,628
                          
                          
                          $
                          347,560





The
Company leased office space for its Fort Lauderdale, Florida location under a
yearly renewable lease agreement bearing monthly rent of approximately $11,300
through June 2008.  In July 2008, this office was relocated to Boca
Raton, Florida, where the Company entered into a five-year lease agreement
bearing monthly rent of $3,313 with an annual 3.0% escalation.  On
August 19, 2009, the Company entered into a lease amendment whereby the Company
shall, upon completion of the improvements to the new space, (i) lease
additional space for a period of 60 months and (ii) extend the lease term of the
existing space to terminate the same time as the expanded space.  Upon
the expansion premises commencement date, the current premises monthly rent
shall be adjusted to $2,840 with 3.0% annual escalation and the expansion
premises monthly rent shall be $6,923 with 3.0% annual
escalation.  The landlord has provided an allowance of $83,070 for the
improvements to the expansion premises as well as a rent abatement for the first
14 months of the lease on the expansion premises.  In February, 2010,
the Company moved into the expansion premises.





The
Company leased office space for its New York, New York location, under a
five-year lease agreement bearing monthly rent of $8,798.  In
September 2008, the Company relocated this office to a larger space in New York,
where the Company entered into a six-year lease agreement bearing monthly rent
of $25,073 with an annual 2.5% escalation.  In March 2009, the Company
subleased the prior New York office space for the remainder of the original
lease term with rent commencing June 1, 2009 at a monthly rate of $6,986 with an
annual 2.5% escalation at the beginning of each calendar year.  As of
December 31, 2009, the Company has recognized in accrued expenses an early cease
use liability of $40,046 pertaining to the prior New York office
space.





In
October 2008, the Company leased office space in San Francisco, California under
a month-to-month lease agreement bearing monthly rent of
$3,371.  Commencing August 1, 2009, the Company relocated this office
to another space in San Francisco, where the Company entered into a five-year
lease agreement bearing monthly rent of $3,089.





In
December 2008, the Company sub-leased office space in Chicago, Illinois under a
6-month agreement bearing monthly rent of $1,400 commencing January 1,
2009.  Commencing July 1, 2009, this lease agreement was renewed for
one year bearing monthly rent of $1,400.  Effective February 1, 2010,
the Company entered into a 15-month lease directly with the landlord bearing a
monthly payment of $2,151, increasing to $2,216 on June 1,
2010.


F-32





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Severance
Package





On April
25, 2008, Bruce Kreindel, the Company’s former Chief Financial Officer (the
“CFO”), Treasurer, and former member of the Board of Directors of the
Company, executed a separation and release agreement (the “Separation
Agreement”) in which he resigned as CFO, Treasurer and as a director. Mr.
Kreindel remained in the position of interim CFO until the appointment of
Mr. Mathews as the Company’s interim CFO on May 15, 2008.  Pursuant to
the terms of the Separation Agreement, Mr. Kreindel received, as severance (i)
$50,000 (paid May 6, 2008), and (ii) $125,000 (all of which has been paid as of
October 31, 2008) paid in accordance with the Company’s regular payroll
practices.  Pursuant to the terms of his employment agreement dated June
28, 2007, Mr. Kreindel received equity in the Company known as “Founder’s
Stock.”  Pursuant to the terms of the Separation Agreement, Mr. Kreindel
retained his Founder’s Stock.  As of the date of the Separation
Agreement, 57,977 options had vested.  Pursuant to the Separation
Agreement, Mr. Kreindel was not entitled to any other options.  Mr.
Kreindel had the right to exercise any of the vested options for a period of 12
months after the separation date.





Employment
Agreements





From time
to time, the Company enters into employment agreements with certain of its
employees.  These agreements typically include bonuses, some of which are
performance-based in nature.  In December 2007, the Company entered
into an employment agreement with an employee whereby the Company was
obligated to pay a guaranteed bonus of $500,000 during the first year of the
employment agreement.  As of December 31, 2008, the Company had paid
the entire amount and no additional amounts are due.





Settlement
with Former Owner of Options Newsletter





As part
of the Options Merger, the Company was obligated to pay up to an additional $1
million (the “Earn-Out”) if certain gross revenues were achieved for the one
year period subsequent to the Options Merger payable 60 days after the end of
each of the quarters starting with March 31, 2008.  On September 30,
2008, the Company entered into a settlement agreement with the former owner of
the Options Newsletter business to settle all amounts due under the Earn-Out and
the January 4, 2008 employment agreement whereby the Company agreed to pay
$600,000 upon execution of the settlement agreement and $500,000, payable in two
equal installments on October 30, 2008 and January 15, 2009.  The
$1,100,000 in payments was discounted to a net present value of $1,090,230 using
a discount rate of 12%.  In addition, all stock options previously
granted to the former owner became fully vested immediately.  As of
March 31, 2009, the Company had paid the entire balance of the payable and
promissory note settlement liability.





Agreement
with Falcon





On May
28, 2008, the Company entered into a six-month Consulting Services Agreement
whereby the Company was to receive investor and marketing relations in exchange
for: (i) issuing 30,000 shares of common stock within 10 days of the Agreement
having a fair value of $189,000, (ii) issuing 30,000 shares of common stock at
August 28, 2008 having a fair value of $189,000, (iii) an initial cash fee of
$30,000, and (iv) a monthly cash fee of $25,000.  On August 12, 2008,
the consultant was terminated.  Accordingly, the 30,000 shares of
common stock due to the consultant on August 28, 2008 were not
issued.  No further consideration is due under this Consulting
Services Agreement.





Minimum
Fees





The
Company is party to multi-year agreements with third parties whereby the Company
is obligated to pay minimum data fees of $676,000 in 2009, $1,605,000 in 2010,
and $900,000 in 2011.  Under the agreements, the Company had paid $542,667
in fees during 2009 and had accrued $133,333 in unpaid fees as of December 31,
2009.





Legal
Matters





From time
to time, we may be involved in litigation relating to claims arising out of our
operations in the normal course of business. As of December 31, 2009, there were
no pending or threatened lawsuits that could reasonably be expected to have a
material effect on the results of our operations.





On May
16, 2008, Devon Cohen, our former Chief Operating Officer, commenced an
arbitration action against us before the American Arbitration Association,
claiming that he was terminated by us without cause and therefore was owed
$600,000 as severance compensation.  On September 24, 2008, the litigation
between the Company and Mr. Cohen was settled with no obligation for either
party to the suit except to pay their own legal fees.


F-33





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





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
13. Concentrations




Concentration
of Credit Risk




Financial
instruments that potentially subject the Company to concentration of credit risk
consist of cash and cash equivalents and accounts receivable.  Cash and
cash equivalents are deposited in the local currency in three financial
institutions in the United States.  The balance, at any given time, may
exceed Federal Deposit Insurance Corporation insurance limits.  As of
December 31, 2009 and 2008, there was approximately $13,336,000 and
$90,000, respectively, in excess of insurable limits.





Concentration
of Revenues, Accounts Receivable and Publisher Expense





For the
years ended December 31, 2009 and 2008, the Company had significant customers
with individual percentage of total revenues equaling 10% or greater as
follows:





For the
                        
                        
                        For theYear Ended
                        
                        
                        Year EndedDecember 31, 2009
                        
                        
                        December 31, 2008Customer
      1
                        
                        
                        14.5
                        %
                        
                        
                        0.0
                        %Customer
      2
                        
                        
                        0.0
                        %
                        
                        
                        10.2
                        %Totals
                        
                        
                        14.5
                        %
                        
                        
                        10.2
                        %





At
December 31, 2009 and 2008, concentration of accounts receivable with
significant customers representing 10% or greater of accounts receivable was as
follows:





December 31, 2009
                        
                        
                        December 31, 2008Customer
      1
                        
                        
                        17.8
                        %
                        
                        
                        0.0
                        %Customer
      2
                        
                        
                        0.0
                        %
                        
                        
                        20.9
                        %Totals
                        
                        
                        17.8
                        %
                        
                        
                        20.9
                        %





For the
years ended December 31, 2009 and 2008, 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
                        
                        
                        For theYear Ended
                        
                        
                        Year EndedDecember 31, 2009
                        
                        
                        December 31, 2008Publisher
      1
                        
                        
                        27.7
                        %
                        
                        
                        38.2
                        %Publisher
      2
                        
                        
                        0.0
                        %
                        
                        
                        10.8
                        %Totals
                        
                        
                        27.7
                        %
                        
                        
                        49.0
                        %





Note
14. Related Party Transactions





Included
in revenues for the year ended December 31, 2008 is approximately $43,000 of
revenue from a related party affiliate which was controlled by one of our
executive officers and directors who was one of the former owners of Desktop
Interactive, the company we acquired on August 31, 2007.





On
September 26, 2008, we sold senior secured promissory notes (the “GRQ
Notes”) in the original aggregate principal amount of $1,300,000 to one of our
co-chairmen, all of which has been repaid as of September 30, 2009 (see
Note 7).


F-34





INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY


NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


DECEMBER
31, 2009 AND 2008





Note
15. Subsequent Events





On March
11, 2010, the Company entered into a sub-lease agreement to relocate its New
York City headquarters to a larger space, having 16,840 square
feet.  The new lease is for a term of 58 months commencing in April
2010, bearing monthly rent of $49,117 with an annual 2.5% escalation. The
Company expects to sublease the office space of its current New York
headquarters for the remainder of the original lease term with monthly rent of
$16,717 with an annual 2.5% escalation.  Accordingly, the Company
estimates that it shall recognize in accrued expenses an early cease use
liability of approximately $380,000 pertaining to the prior New York office
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 certificate of deposit with its banking
institution in the amount of $294,700 and pledged that to the letter of
credit.  The Company shall consider $294,700 as restricted cash until such
letter of credit expires.





In
January 2010, the Company pledged a $500,000, 3-month certificate of deposit, to
a third party in connection with a service agreement.





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





In
February 2010, the Company entered into a lease agreement to relocate its
southwest sales office to a larger space in Santa Monica, California.  The
new lease is for a term of 60 months commencing in May 2010, at an initial
monthly base rent of $3,827 with an annual 3% escalation.





In
preparing these consolidated financial statements, the Company has evaluated
events and transactions for potential recognition or disclosure through the date
of filing.


F-35