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
      1934For
      the fiscal year ended: December 31, 2008or ̈
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
      EXCHANGE ACT
      OF 1934For
      the transition period from: _____________ to
  _____________











interCLICK,
Inc.


(Exact
name of registrant as specified in its charter)











Delaware
              333-141141
              01-0692341(State
      or Other Jurisdiction
              (Commission
              (I.R.S.
      Employerof
      Incorporation or Organization)
              File
      Number)
              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)




N/A


(Former
name or former address, if changed since last report)





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





Title
      of each class
              
              Name
      of each exchange on which registeredNone
              
              None





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





None


(Title of
Class)





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 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   xNo





State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter.  The total market value held by non-affiliates of interCLICK
is approximately $60,427,851 based on 20,142,617 shares at the closing price of
$3.00 on June 30, 2008.





Indicate
the number of shares outstanding of each of the registrant’s classes of common
stock, as of the latest practicable date.  37,845,167 shares were
outstanding as of March 27, 2009.





APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY


PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:





Indicate
by check mark whether the registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court.  ̈  Yes   ̈  No





DOCUMENTS
INCORPORATED BY REFERENCE












INDEX





PART
      IItem
      1.
                                  Business.
                                  2Item
      1A.
                                  Risk
      Factors.
                                  4Item
      1B.
                                  Unresolved
      Staff Comments.
                                  4Item
      2.
                                  Properties.
                                  4Item
      3.
                                  Legal
      Proceedings.
                                  5Item
      4.
                                  Submission
      of Matters to a Vote of Security Holders.
                                  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
      Operation.
                                  8Item
      7A.
                                  Quantitative
      and Qualitative Disclosures About Market Risk.
                                  20Item
      8.
                                  Financial
      Statements and Supplementary Data.
                                  20Item
      9.
                                  Changes
      in and Disagreements With Accountants on Accounting and Financial
      Disclosure.
                                  20Item
      9A.
                                  Controls
      and Procedures.
                                  20Iteam
      9A(T).
                                  Controls
      and Procedures.
                                  20Item
      9B.
                                  Other
      Information.
                                  21PART
      IIIItem
      10.
                                  Directors,
      Executive Officers and Corporate Governance.
                                  22Item
      11.
                                  Executive
      Compensation.
                                  24Item
      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
      Accounting Fees and Services.
                                  29PART
      IVItem
      15.
                                  Exhibits,
      Financial Statement Schedules.
                                  31SIGNATURES
                                  33





i





PART
I




Item
      1.
            Business.




Company Overview.





interCLICK, Inc. (the “Company” or
“interCLICK”) and its subsidiaries, Customer Acquisition Network, Inc. (“CAN”)
and Desktop Acquisition Sub, Inc. (“Desktop”), provide Internet advertising
solutions for Internet publishers and advertisers.





interCLICK offers advanced proprietary
demographic, behavioral, contextual, geographic and retargeting technologies
across a network of name brand publishers to ensure the right message is
delivered to a precise audience in a brand friendly environment.





interCLICK
differentiates its online ad network by offering a unique combination of
advanced behavioral targeting with full site-by-site transparency, providing
advertisers the ability to identify, track and target their desired
audiences.





According to comScore reports, the
Company has grown approximately twice as fast as any other U.S. online display
advertising network in terms of audience reach over the last 18
months.  As of December 2008, the Company serves ads to 72% of all
U.S. Internet users, reaching over 137 million unique users.





Over the
course of 2008, the Company enjoyed gross margin expansion due to improved
supply chain management. In addition, our advanced proprietary technology
platform enabled advertiser campaign performance improvements, thus further
driving profit performance gains.





Industry
Overview





According to Jupiter Research, online
advertisers’ use of behavioral targeting increased significantly in 2008 with
nearly 25% allocating their ad budgets accordingly.  This percentage
increased 3% from 2006 to 2007 and increased 8% from 2007 to
2008.  Based on ad network surveys, Jupiter Research indicates their
clients’ best behavioral targeting campaigns have realized returns more than
twice those of regularly optimized campaigns.  Furthermore, the
Jupiter Research report estimates that almost twice as many marketers will use
behavioral targeting in the next year.




Based on
the Company's current experience, advertisers' focus on 'return on ad spend' is
intensifying with the weakening economy. As such, the Company expects market
share gains will accrue to those ad networks with the most advanced behavioral
targeting capabilities.


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 ROIs.  According to
eMarketer, “with the economy struggling and budgets being reduced, U.S.
marketers are focusing on quantifiable tactics to get their messages
across.”  In a February 2008 survey conducted by iMedia Connection, a
marketing community website, 59% of U.S. marketers stated that they were
dedicating their firms to measurable, ROI driven strategies.





Seasonality





Our business is subject to seasonal
fluctuations.  The fourth quarter of the calendar year, during the
holiday season, is our strongest. The third calendar quarter marks the start of
the stronger half of the year.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. Notwithstanding the seasonality of the business,
management anticipates that the first quarter of 2009 will have its highest
gross margins to date.




2


Customers





In order to provide opportunities for
advertisers, we buy display advertising banner inventory from publishers or
companies that maintain websites and seek to monetize their websites through the
sale of advertising. During 2008, we derived more than 10% of our revenues from
one customer, which was not a 10% customer in 2007. In 2007, we had two
customers who each accounted for more than 30% of our revenues; neither was a
10% customer in 2008. Our margins are based upon our ability to deliver
advertising campaigns at an efficiency level sufficient to realize pricing in
excess of the cost incurred securing inventory from the website publishers. We
deliver advertising campaigns for a wide variety of advertisers and advertising
agency partners with no concentration on any specific industry
vertical.  As such, interCLICK’s existing advertiser base includes
numerous industries including but not limited to — consumer packaged goods,
retail, electronics, Internet, automotive, pharmaceuticals, wireless
communications and the entertainment industry.





Sales
and Marketing





We sell and market our product and
services through our sales team of 14 experienced sales persons as of December
31, 2008 (which increased to 18 as of March 25, 2009).  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 the Company’s New York head
office.





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, and newspapers and
magazines.  Furthermore, many of the advertising, media, and Internet
companies possess greater resources and are more adequately capitalized than the
Company.




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 remain price
competitive.




Research
and Development Expenses





We had no research and development
expenses in 2007 or 2008.





Regulation





In February 2009, the Federal Trade
Commission (“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.




3


Employees





At December 31, 2008, the Company had a
total of 37 full-time employees (which as of March 25, 2009 increased to 47
employees of which 45 were full time employees). None of these employees
are members of a union. Management believes that our relations with our
employees are good.





Corporate
History and Acquisitions





The
Company was formed in Delaware on March 4, 2002 under the name Outside
Entertainment, Inc.  On August 28, 2007, we completed a reverse merger
(the “CAN Merger”) and acquired CAN, a Delaware corporation formed on June 14,
2007.  In connection with the merger, we changed our name to Customer
Acquisition Network Holdings, Inc.  After the CAN Merger, the Company
succeeded to the business of CAN as its sole line of business and CAN became a
wholly-owned subsidiary of the Company. On August 28, 2007, the Company also
acquired Desktop.  On June 25, 2008, the Company changed its name to
interCLICK, Inc.





On
January 4, 2008, the Company acquired Options Newsletter, Inc. (“Options
Newsletter”), a privately-held Delaware corporation primarily engaged in the
email service provider business.  The Company paid Options
Newsletter’s shareholder a total of $2,600,000 (not including interest) but
including $2,500,000 purchase price consideration and $100,000 employment
agreement settlement consideration including $250,000 in 2009. The Company also
issued the Options Newsletter shareholder 1,000,000 shares of common stock as
purchase price and 300,000 options exercisable at $1.00 under the employment
agreement. On June 23, 2008, the Company sold the Options Newsletter business to
Options Media Group Holdings, Inc. (“Options Media”).  The Company
received (i) 12,500,000 shares of Options Media stock, (ii) $3,000,000 in cash
and (iii) a $1,000,000 senior secured promissory note.  We recognized
a loss of $3,571,682 from the sale of Options Newsletter and a $1,235,940
loss from operations during the period we owned Options Newsletter; both of
these losses are included in discontinued operations.  Subsequent to the
sale of Options Newsletter from June 23, 2008 through September 18, 2008, we
retained an ownership interest in Options Media greater than 20%and
recognized a loss on equity investment of $653,231.  See Item 8. Financial
Statements – Note 7. As of the date of this Report, the Company owns 7,500,000
shares of Options Media and the note has been repaid. See Item 13. Certain
Relationships and Related Transactions, and Director Independence for a
description of how this note was paid and our note payable to our
Co-Chairman.





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.




Item
1A.         Risk Factors.





Not
applicable to smaller reporting companies.





Item
      1B.
            Unresolved
      Staff Comments.




None.




Item
      2.
            Properties.





We have the following
offices:





Location
                      
                      Approximate Size
                      
                      Monthly Cost(1)
                      
                      Expiration DateExecutive
      offices
                        New
      York, NY
                      
                      5,786
      sq. ft.
                      
                      
                      $25,073
                      
                      December
      31, 2014Former
      executive offices(2)
                        New
      York, NY
                      
                      2,500
      sq. ft.
                      
                      
                      $8,798
                      
                      June
      30, 2012Technology
      offices
                        Boca
      Raton, FL
                      
                      2,272
      sq. ft.
                      
                      
                      $3,313
                      
                      February
      2014Sales
      office(3)(4)
                        Chicago,
      IL
                      
                      3
      workstations
                      
                      
                      $1,400
                      
                      June
      30, 2009Sales
      office
                        San
      Francisco, CA
                      
                      3
      workstations
                      
                      
                      $3,371
                      
                      Month
      to Month LeaseSales
      office(3)(4)
                        Los
      Angeles, CA
                      
                      2
      workstations
                      
                      
                      $1,532
                      
                      August
      31,
2009




4





(1)
            Our
      leases typically have annual escalations ranging from 2.5% to 3.0%. In
      addition, all leases typically have such pass throughs such as property
      taxes and electricity.


(2)
            We
      are seeking to sublease this space.


(3)
            These
      sales offices are located in executive
suites.


(4)
            Effective
      in 2009.





Item
      3.
            Legal
      Proceedings.




None.




Item
      4.
            Submission
      of Matters to a Vote of Security
Holders.




None.




5




PART
II




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




Our
common stock is quoted on the Over-the-Counter Bulletin Board under the symbol
“ICLK”. The last reported sale price of our common stock as reported by the
Bulletin Board on March 27, 2009 was $0.80. As of that date, there were 108
record holders. The following table provides the high and low bid price
information for our common stock for the periods indicated as reported by the
Bulletin Board.





Year
                      
                      Quarter Ended
                      
                      Bid PricesHigh
                      
                      
                      Low2008
                      
                      March 31,
      2008
                      
                      $
                      6.25
                      
                      
                      $
                      3.56June 30,
      2008
                      
                      $
                      3.80
                      
                      
                      $
                      2.60September 30,
      2008
                      
                      $
                      3.49
                      
                      
                      $
                      1.12December 31,
      2008
                      
                      $
                      1.92
                      
                      
                      $
                      0.452007
                      
                      December 31,
      2007 (1)
                      
                      $
                      6.49
                      
                      
                      $
                      5.10





(1) Our
common stock began trading on October 31, 2007.





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.





Equity
Compensation Plan Information




The
following chart reflects the number of options granted and the weighted average
exercise price under our compensation plans as of December 31,
2008.





Name Of Plan
                      
                      Aggregate
                        Number of
                        Securities
                        Underlying
                        Options
                        Granted
                      
                      Weighted
                        Average
                        Exercise
                        Price Per
                        Share
                      
                      Aggregate
                        Number of
                        Securities
                        Available
                        for
                        GrantEquity
      compensation plans approved by security holders
                      
                      0
                      
                      $
                      0
                      
                      0Equity
      compensation plans not approved bysecurity
      holders
                      
                      5,075,954
                      
                      $
                      1.50
                      
                      424,046Total
                      
                      5,075,954
                      
                      $
                      1.50
                      
                      424,046





Our Board
of Directors has adopted the 2007 Equity Incentive Plan (the “Equity Plan”) and
the 2007 Incentive Stock and Award Plan (the “Incentive Plan) (collectively, the
“Plans”).  The Equity Plan reserves 4,500,000 and the Incentive Plan
provided for the grant of up to 1,000,000stock options or shares
of common stock to directors, officers, consultants, advisors or employees of
the Company. On
February 6, 2009, the Company increased the total number of shares available for
grant under the Incentive Plan to 1,225,000 shares.  As of March 25,
2009, there were 12,796 shares available for grant under the Incentive Plan and
no shares available For grant under the Equity Plan.





Recent
Sales of Unregistered Securities





In
addition to those unregistered securities previously disclosed in reports filed
with the Securities and Exchange Commission (“SEC”) since June 14, 2007
(Inception), we have sold securities without registration under the Securities
Act of 1933 in reliance upon the exemption provided in Section 4(2) and
Rule 506 thereunder as described below. All securities in the table below
are shares of common stock.




6




Name
                                
                                Date Sold
                                
                                No. of
                                  Securities
                                
                                Reason for IssuanceShareholder
                                
                                October
      12, 2007
                                
                                
                                66,667
                                
                                Legal
      feesShareholder
                                
                                January
      4, 2008
                                
                                
                                1,000,000
                                
                                AcquisitionShareholder
                                
                                May
      28, 2008
                                
                                
                                60,000
                                
                                In
      consideration for IR
services





Item
      6.
            Selected
      Financial Data.




Not required for smaller reporting
companies.




7




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




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" and elsewhere in this
Report on Form 10-K.





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 revenue recognition, allowance
for doubtful accounts, income taxes, goodwill and other intangible assets, and
contingencies. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates and
assumptions.




Company
Overview




We
operate the interCLICK Network, an online ad network that combines advanced
behavioral targeting with site by site reporting, allowing advertisers to
identify and track their desired audience. interCLICK offers advanced
proprietary demographic, behavioral, contextual, geographic and retargeting
technologies across a network of name brand publishers to ensure the right
message is delivered to a precise audience in a brand friendly
environment.




By
combining site by site transparency and advanced behavioral targeting,
interCLICK is taking the inefficiencies out of the buyer/seller dynamic by
allowing advertisers to achieve a direct response metric, whether it is a click,
lead or a sale. We believe that this fundamental difference allows
online marketers to achieve a better return on investment while still being
able to target the premium websites.





During
2008 and more recently, the following significant factors have affected our
operations:





·
            Our
      2008 revenues grew to $22.5 million or 237% over 2007 revenues of
      $6.7 million. We began operations in June 2007 and completed the Desktop
      acquisition on August 31,
  2007;


·
            Our
      fourth quarter 2008 revenues of $8.5 million increased 47% from third
      quarter revenues of $5.8 million and 54% from fourth quarter 2007 revenues
      of $5.5 million;


·
            Our
      fourth quarter 2008 gross profit of $3.2 million increased 79% from third
      quarter gross profit of $1.8 million and 155% from fourth quarter 2007
      gross profit of $1.3 million;


·
            Gross
      margins for 2008 were 31.7% compared to gross margins of 20.1% for
      2007;


·
            The
      improvement in our gross margins is illustrated by fourth quarter 2008
      gross margins of 37.8%, compared to third quarter 2008 gross margins of
      31.1% and fourth quarter 2007 gross margins of
  22.8%;


·
            To
      support our future growth, in 2008 and 2009 we opened sales offices in
      Chicago, Illinois, San Francisco, California and Los Angeles,
      California;


·
            Our
      sales staff has grown from 7 people on January 1, 2008 to 18 people as of
      the date of this Report; and


·
            In
      February 2009, we increased our line of credit to $4.5 million from $3.5
      million.




Results
of Operations





The
following table presents our results of operations for the year ended December
31, 2008 and for the period from June 14, 2007 (Inception) to December 31, 2007.
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 Newsletter as a discontinued operation.




8




For the
                    Year Ended
                    December 31, 2008
                  
                  
                  For the period
                    from June 14, 2007
                    (Inception) to
                    December 31, 2007Revenues
                  
                  $
                  22,452,333
                  
                  
                  $
                  6,654,768Cost
      of revenues
                  
                  
                  15,344,337
                  
                  
                  
                  5,315,418Gross
      profit
                  
                  
                  7,107,996
                  
                  
                  
                  1,339,350Total
      operating expenses
                  
                  
                  13,700,574
                  
                  
                  
                  4,871,027Operating
      loss from continuing operations
                  
                  
                  (6,592,578
                  )
                  
                  
                  (3,531,677
                  )Total
      other income (expense)
                  
                  
                  (1,659,413
                  )
                  
                  
                  (239,290
                  )Loss
      from continuing operations before income taxes
                  
                  
                  (8,251,991
                  )
                  
                  
                  (3,770,967
                  )Income
      tax benefit
                  
                  
                  1,687,305
                  
                  
                  
                  538,000Equity
      in investee’s loss,
      net of income taxes
                  
                  
                  (653,231
                  )
                  
                  
                  -Net
      loss from discontinued operations, net of income taxes
                  
                  
                  (4,807,622
                  )
                  
                  
                  -Net
      loss
                  
                  $
                  (12,025,539
                  )
                  
                  $
                  (3,232,967
                  )Loss
      per share from continuing operations – basis and diluted
                  
                  $
                  (0.19
                  )
                  
                  $
                  (0.12
                  )Loss
      per share from discontinued operations – basis and diluted
                  
                  $
                  (0.13
                  )
                  
                  $
                  -Net
      loss per share – basic and diluted
                  
                  $
                  (0.32
                  )
                  
                  $
                  (0.12
                  )Weighted
      average shares outstanding – basic and diluted
                  
                  
                  37,137,877
                  
                  
                  
                  28,025,035





Year
Ended December 31, 2008 Compared with The Period From June 14, 2007 (Inception)
to December 31, 2007





Revenues
  Unless
otherwise indicated, the following discussion relates to our continuing
operations and does not include the operations of Options Newsletter. We
acquired that business in January 2008 and sold it in June 2008 resulting in a
net loss on sale of $3,571,682. Revenues for the year ended December 31, 2008
increased to $22,452,333 from $6,654,768 for the period from June 14, 2007
(Inception) to December 31, 2007, an increase of 237%. The increase is primarily
attributable to growth of the Company’s advertiser base through our expanded
national sales force and through budget increases among existing
advertisers.
 
 Seasonally,
the third quarter marks the start of the stronger half of the year in terms of
demand for CPM advertising campaigns.  interCLICK is particularly sensitive
to this seasonality effect given that the majority of its revenues are tied to
CPM campaigns.  Despite the marked deterioration of the broader economy in
the second half of 2008, the overall U.S. Internet audience based on comScore
data expanded to 190.7mm average viewers in the fourth quarter of 2008, an
increase of 0.8%, as compared to the third quarter of 2008, and an increase of
4.4%, as compared to the fourth quarter of 2007.  For the same periods
indicated, the Company experienced growth of 7.5% and 35.8%, respectively, as
its audience reach expanded rapidly based on signing more publishers and gaining
access to more inventory.




9




Given the
continued overall growth in online advertising, coupled with other strategic
initiatives undertaken by interCLICK, including our continued enhancement of our
behavioral targeting system and our continued ability to acquire top tier
publishing inventory, we expect to continue to increase our advertising customer
base and revenues on a year-over-year basis.




We expect
that revenues from large branded advertisers will continue to grow as a
percentage of our revenues in future quarters. During the year ended December
31, 2008, revenues from such advertisers accounted for more than 85% of revenues
as compared to less than 75% for the period from June 14, 2007 (Inception) to
December 31, 2007.




Cost
of Revenues and Gross Profit




Cost of
revenues for the year ended December 31, 2008 increased to $15,344,337 from
$5,315,418 for the period from June 14, 2007 (Inception) to December 31, 2007,
an increase of 189%. The increase is primarily attributable to the growth in
advertising campaigns requiring the purchase of appropriate levels of inventory
from publishers. Cost of revenues is comprised of the amounts we paid to website
publishers on interCLICK’s online advertising network. Cost of revenues
represented 68.3% of revenues for the year ended December 31, 2008 compared to
79.9 % of revenues for the period from June 14, 2007 (Inception) to December 31,
2007. The decrease is primarily attributable to improvements in the Company's
supply chain management platform, resulting in a better match between acquired
publisher inventory and advertising campaign demand.
 
 Gross
profit for the year ended December 31, 2008 increased to $7,107,996 from
$1,339,350 for the period from June 14, 2007 (Inception) to December 31, 2007,
an increase of 431%.  The increase is primarily attributable to a revenue
mix shift towards higher margin CPM advertising campaigns, as well as improved
supply chain management.  Gross profit represented 31.7% of revenues for
the year ended December 31, 2008 compared to 20.1% of revenues for the period
from June 14, 2007 (Inception) to December 31, 2007.
 
 We pay
interCLICK’s website publishers on either a fixed CPM volume commitment basis or
on a revenue share basis. The amount of display advertisements we deliver (e.g.
impressions) reflects the level of publishing inventory we can acquire. Based on
our comScore ranking as of December 31, 2008, we reach 71.9% of the domestic
online population and are ranked as the tenth largest ad network in the domestic
online marketplace.  We endeavor both to expand our publisher base and to
increase the levels of acquired publishing inventory, particularly from tier one
publishers.


Operating
Expenses:





General and
Administrative





General
and administrative expenses consist primarily of executive and administrative
compensation, facilities costs, insurance, depreciation, professional fees and
investor relations fees.  General and administrative expenses for the
year ended December 31, 2008 increased to $6,269,070 from $2,442,705 for the
period from June 14, 2007 (Inception) to December 31, 2007, an increase of
157%.  The increase is primarily attributable to headcount expansion
over the period.  General and administrative expenses represented
27.9% of revenues for the year ended December 31, 2008 compared to 36.7% of
revenues for the period from June 14, 2007 (Inception) to December 31,
2007.





Included
in general and administrative expenses are non-cash stock based compensation,
which is comprised of expense from our stock and stock option plans and
amortization of warrants issued for consulting services.  Non-cash
stock based compensation for the year ended December 31, 2008 increased to
$1,941,191 from $954,167 for the period from June 14, 2007 (Inception) to
December 31, 2007, an increase of 103%.   The increase is
primarily attributable to the award of stock option grants to current as well as
new employees.  Non-cash stock based compensation represented 8.5% of
revenues for the year ended December 31, 2008 compared to 14.3% of revenues for
the period from June 14, 2007 (Inception) to December 31, 2007. The remaining
portion of stock-based expenses totaling $1,121,818 is allocated to discontinued
operations which are discussed below.




Future
non-cash compensation expense related to unvested options, restricted stock
awards and warrants amounts to $4,360,526 as of December 31, 2008 of which
$1,974,521 will be amortized in 2009.




Sales
and Marketing





Sales and
marketing expenses consist primarily of compensation for sales and marketing and
related support resources, sales commissions and trade shows. Sales and
marketing expenses for the year ended December 31, 2008 increased to $4,884,973
from $1,073,884 for the period from June 14, 2007 (Inception) to December 31,
2007, an increase of 355%.   The increase is primarily
attributable to the Company's national sales-force expansion.  Sales
and marketing expenses represented 21.8% of revenues for the year ended December
31, 2008 compared to 16.1% of revenues for the period from June 14, 2007
(Inception) to December 31, 2007.




10




We expect
sales and marketing costs to increase as a result of our continued expansion of
sales and marketing resources and the expected overall growth in our
business.





Technology
Support





Technology
support consists primarily of compensation of technology support and related
consulting resources and third party ad server costs for interCLICK. Technology
support and related consulting support resources have been directed primarily
towards continued enhancement of our proprietary behavioral targeting platform,
including integration of 3rd party
data providers, upgrades to our optimization system, and ongoing maintenance and
improvement of our technology infrastructure.  Technology support expenses
for the year ended December 31, 2008 increased to $1,061,182 from $748,968 for
the period from June 14, 2007 (Inception) to December 31, 2007, an increase of
41.7%. The increase is primarily attributable to expenditures necessary to
support the Company's increased operating scale. Technology support expenses
represented 4.7% of revenues for the year ended December 31, 2008 compared to
11.3% of revenues for the period from June 14, 2007 (Inception) to December 31,
2007.





Merger,
Acquisition and Divestiture Costs





Merger,
acquisition and divestiture costs consist primarily of legal, audit and
accounting services related to the acquisition and subsequent divestiture of
Options Newsletter in addition to the earlier Desktop
acquisition.  Merger, acquisition and divestiture costs for the year
ended December 31, 2008 increased to $652,104 from $187,353 for the period from
June 14, 2007 (Inception) to December 31, 2007, an increase of
248%.   The increase is primarily attributable to an acquisition
in early 2008 and to management’s strategic decision later in 2008 to focus
on the organic growth of its Internet ad network operations and resulting
divestiture of Acquisition Sub.  Merger, acquisition and divestiture
costs represented 2.9% of revenues for the year ended December 31, 2008 compared
to 2.8% of revenues for the period from June 14, 2007 (Inception) to December
31, 2007.





Due to
the possibility of future transactions, management expects the occurrence of
such costs may continue.





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, 2008 increased to $418,508 from $302,062 for the period from June
14, 2007 (Inception) to December 31, 2007, an increase of 38.6%.  The
increase is primarily attributable to the accelerated amortization applicable to
the acquired customer relationships. Amortization of
intangible assets represented 1.9% of revenues for the year ended December 31,
2008 compared to 4.5% of revenues for the period from June 14, 2007 (Inception)
to December 31, 2007.





Income
taxes




As part
of the allocation of the purchase price associated with Options Newsletter, (see
Note 1 of the consolidated financial statements) a deferred tax liability of
$264,000 was established as a result of differences between the book and tax
basis of acquired intangible assets. With our divesture of the business of
Options Newsletter in June 2008, 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.





We
recognized a tax benefit of $1,687,305 from continuing operations for the year
ended December 31, 2008, due to our continued losses. At December 31, 2008, the
Company had an estimated $3,383,088 of net operating loss carry-forwards
which will expire from 2027 to 2028.




Loss From Discontinued Operations,
Net








11




Liquidity
and Capital Resources





Net cash
used in operating activities during the year ended December 31, 2008 totaled
approximately $3.0 million. This resulted primarily from a loss from continuing
operations of approximately $7.2 million (net of the loss from discontinued
operations of $4,807,622)and a $2.1 million outflow of cash from changes in
operating assets and liabilities offset by $6.3 million in non-cash
charges.





Net cash
provided by investing activities for the year ended December 31, 2008 totaled
approximately $0.7 million. This resulted primarily from proceeds from the sale
of available-for-sale securities of approximately $1.1 million offset by
purchases of property and equipment of approximately $0.4 million.





Net cash
provided by financing activities for the year ended December 31, 2008 was
approximately $1.3 million.  This resulted primarily from
approximately $2.9 million in cash received from stock subscriptions,
approximately $2.5 million received under a credit facility net of
repayments and $1.3 million received from the issuance of notes payable
offset by approximately $5.4 million in note payable principal
payments.





In
November 2007, we sold senior secured promissory notes (the “Longview
Note”) 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 sale of the Longview Note.





The
Longview Note was 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 Note first, to pay expenses and commissions related to the
sale of the Longview Note and second, for the general working capital needs and
acquisitions of companies or businesses reasonably related to Internet marketing
and advertising.





On May 5,
2008, $611,111 of the original $5,000,000 face value of debt was settled by the
issuance of 305,500  shares of common stock and 152,750 five-year
warrants exercisable at $2.50 per share having a 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 Note. Such fees of $91,437 are 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.  Amortization of the deferred
costs for the period from June 14, 2007 (Inception) to December 31, 2007 was
$13,932, all of which is included in interest expense.





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 Note 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 Note from June
13, 2008 until June 20, 2008. The Extension Amount was credited against the
outstanding principal balance in connection with the Options Newsletter
sale.





On June
23, 2008, the Company utilized proceeds from the Options Newsletter sale in
order to pay $2,750,000 of the balance on the Longview Note.  The
remaining balance of the Longview Note as of June 23, 2008 (giving effect to the
increase in principal of $134,684) was $1,773,573. Also, the maturity date of
the Longview Note was extended to August 30, 2008 and the interest rate was
increased from 8% to 12%.  The Company also pledged its Options Media
stock to Longview in order to secure the remaining balance of the Longview
Note.  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 Note had
been repaid.




12




On
September 26, 2008, we borrowed $1,300,000 from one of our Co-Chairmen and
issued senior secured promissory notes (the “GRQ Notes”).  The GRQ
Notes bear interest at the rate of 6% per annum and were due December 31,
2008.  We used the net proceeds from the sale of the GRQ Notes to
repay the Longview Note.  The Company pledged the Options Media stock
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 remaining GRQ Note to June 30, 2009 (all other
terms remained the same with the Company prepaying principal of
$250,000).  The principal balance is now $400,000.




Accrued
interest related to above notes at December 31, 2008 and 2007 was $16,948 and
$33,333, respectively.





As of the
date of this Report, we have $315,242 in available cash and cash equivalents.
Depending upon our accounts receivables, we can borrow an additional $1,124,888
on our line of credit in addition to the current balance of $3,375,112. The line
of credit expires on May 12, 2010.  The lender is privately-held and
we do not have access to any information concerning its financial condition. See
“Risk Factors” which follow in this Report.





Related
Party Transactions





No
related party transactions had a material impact on our operating
results.  See Item 13 below and Note 14 to the consolidated financial
statements.





New
Accounting Pronouncements





See Note
3 to the consolidated financial statements.





Critical
Accounting Estimates





Our
management makes estimates in connection with the consolidated financial
statement see Item 7 below and Note 3 to the consolidated financial
statement.





With the
present economic recession, management is particularly attentive to the
potential for lengthening account receivable collection cycles and the attendant
possibility of an increase in bad debts. To this end, bad debt reserves were
increased 183% over the course of 2008 to $425,000, or 5.6% of gross accounts
receivable, from $150,000, or 4.2% of gross accounts receivable, at the end of
2007. Note that in 2008 bad debt expense totaled $414,737, or 1.8% of revenues,
an increase of 257% from $116,055, or 1.7% of revenues in 2007.





Away from
bad debt reserves and write-offs, management is sensitive to the carrying value
of the 7,500,000 Options Media shares currently held on the balance sheet
at $1,650,000 based on the transaction price of the sales closed in September
2008.  Note that the Options Media investment carrying value exceeds
the Company’s tangible shareholders’ equity of $1,561,651.




Forward
Looking Statements





The
statements in this Report relating to the affect of self-regulation on our
business, our ability to provide our marketers a high ROI, our expectations
regarding increased revenues and customer base, our expectations regarding
future acquisitions and our intention to expand our inventory are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Additionally, words such as “expects,”
“anticipates,” “intends,” “believes,” “will” and similar words are used to
identify forward-looking statements.





The
results anticipated by any or all of these forward-looking statements might not
occur. Important factors, uncertainties and risks that may cause actual results
to differ materially from these forward-looking statements are contained in the
Risk Factors which follow.  We undertake no obligation to publicly update
or revise any forward-looking statements, whether as the result of new
information, future events or otherwise. For more information regarding some of
the ongoing risks and uncertainties of our business, see our other filings with
the SEC.




13




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 operation 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




Our
ability to continue as a going concern is in doubt absent obtaining adequate new
debt or equity financing and achieving sufficient sales levels.




Because
we may not have sufficient working capital (including the available balance from
our line of credit) and cash flows for continued operations for at least the
next 12 months, our auditors have issued a qualified opinion. Our continued
existence is dependent upon us sustaining operating profitability or obtaining
the necessary capital to meet our expenditures.  We cannot assure you
that we will unable to generate sufficient sales or raise adequate capital to
meet our future working capital needs.





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 a new 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
start-up companies in an intensely competitive industry. There can be no
assurance that our efforts will be successful or that we will be able to attain
profitability.




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. We are currently
relying on our accounts receivable factoring line of credit with a commercial
lender which expires in May 2010.This lender
recentlyexpanded
our line to $4,500,000, and we are seeking to increase the line of credit to
support our expected growth. 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 service sector, we may be adversely
affected in our ability to draw on our line of credit. The slowdown in the
global economy, the freezing of the credit markets and severe decline in the
stock market 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
investments 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.





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 will
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.




14


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




We have
grown in part because we completed the Desktop acquisition in August 2007, and
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, like the
acquisition of Options Newsletter 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.





If
we fail to manage our existing publishing inventory 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 effectively.  Our publishers are not bound by long-term
contracts that ensure us a consistent supply of 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.





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 publishing inventory effectively to meet our advertiser customers’
changing requirements, our revenues could decline. Our growth depends on our
ability to expand our publishing inventory. To attract new customers, we must
maintain a consistent supply of attractive publishing inventory. We intend to
expand our inventory by selectively adding to our networks 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 publishing inventory and our pricing policies. We cannot assure you
that the size of our publishing inventory will increase or remain constant in
the future.





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





Very
recently, the FTC issued guidelines recommending that companies like interCLICK
that engage in behavioral targeting engage in 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 cannot manage our growth effectively, we may not become
profitable.





Businesses
which grow rapidly often have difficulty managing their growth. If our business
continues to grow as rapidly 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,
and your investment could be lost.




15


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




Our revenues and operating results 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 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;





•
fluctuations in sales of different types of advertising (i.e., the amount of
advertising sold at higher rates rather than lower rates);





•
fluctuations in the cost of online advertising;





•
seasonal patterns in Internet advertisers’ spending;





•
worsening economic conditions which cause advertisers to reduce Internet
spending and consumers to reduce their purchases;





• 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;





• 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.





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, David Garrity, Chief Financial Officer and Andrew Katz,
Chief Technology Officer, 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, Garrity or Andrew Katz 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 can exert significant control over our business and
affairs and have actual or potential interests that may depart from those of our
other shareholders.




Our two
largest shareholders and 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 will have significant influence over and control
all corporate actions requiring shareholder approval, irrespective of how our
other shareholders may vote, including the following actions:




16




•           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.




We
may be subject to litigation for infringing the intellectual property rights of
others.




Our
success will depend, in part, on our ability to protect our intellectual
property and to operate without infringing on the intellectual property rights
of others. There can be no guarantee that any of our intellectual property will
not be challenged by third parties. We may be subject to patent infringement
claims or other intellectual property infringement claims that would be costly
to defend and could limit our ability to use certain critical
technologies.




If we
were to acquire or develop a related product or business model that a third
party construes as infringing upon a patent, then we could be asked to license,
re-engineer our product(s) or revise our business model according to terms that
may be extremely expensive and/or unreasonable. Additionally, if a third party
construes any of our current products or business models as infringing upon the
above-referenced patent, then we could be asked to license, re-engineer our
product(s) or revise our business model according to terms that could be
extremely expensive and/or unreasonable.




Any
patent litigation could negatively impact our business by diverting resources
and management attention from other aspects of the business and adding
uncertainty as to the ownership of technology and services that we view as
proprietary and essential to our business. In addition, a successful claim of
patent infringement against us and our failure or inability to license the
infringed or similar technology on reasonable terms, or at all, could have a
material adverse effect on our business.





We
may be involved in lawsuits to protect our intellectual property rights, which
could be expensive and time consuming.




We rely
on trade secrets to protect our intellectual property rights. If a third party
violates 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.




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.




17




We
may be liable for content displayed on our networks of publishers which could
increase our expenses.





We may be
liable to third-parties for content in the advertising we deliver on our network
if the content involved violates copyright, trademark or other intellectual
property rights of third-parties or if the content if defamatory.  Any
claims or counterclaims could be time-consuming, could result in costly
litigation and could divert management’s attention which could adversely affect
our business.





If
we are not able to respond to the rapid technological change characteristic of
our industry, our products and 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 products and services obsolete or
uncompetitive.





Our
technical systems in the future will be vulnerable to interruption and damage
that may be costly and time-consuming to resolve and may harm our business and
reputation.





Our success depends on the continuing
and uninterrupted performance of our 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. 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, 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.





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




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 from
to our business due to hurricanes or tropical storms.





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




We will
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 also may 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.




18




Government
regulation of the Internet may adversely affect our business and operating
results.




We may be
subject to additional operating restrictions and regulations in the future.
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, legislatures at the federal and
state levels 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.




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:





•           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 Federal
Trade Commission 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 will 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.




Risks
Relating to the Common Stock




Because
the market for our common stock is limited, persons who purchase our common
stock may not be able to resell their shares at or above the purchase price paid
by them.





Our
common stock trades on the Over-the-Counter Bulletin Board which is not a liquid
market. There is currently only a limited public market for our common stock. We
cannot assure you that an active public market for our common stock will develop
or be sustained in the future. If an active market for our common stock does not
develop or is not sustained, the price may decline.





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 achieve and maintain
profitability;


·
            Short
      selling activities;


·
            The
      loss of major advertisers or
publishers;


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


·
            The
      departure of key personnel;




19




·
            Regulatory
      developments;


·
            Changes
      in market valuations of similar companies;
or


·
            The
      sale of a large amount of common stock by our shareholders including those
      who invested prior to commencement of
trading.




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
almost all 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 the
date of this Report, we had outstanding 37,845,167 shares of common stock of
which our directors and executive officers own 17,702,550 which are subject to
the limitations of Rule 144 under the Securities Act of 1933.  Most of
the remaining outstanding shares are freely tradable.





In general, Rule 144 provides that any
non-affiliate of the Company, 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 SEC filings.  After one year, a non-affiliate may
sell without any restrictions.





An
affiliate of the Company may sell after six months with the following
restrictions:





(i)
            we
      are current in our 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
almost all of our outstanding shares are freely tradable and a number of shares
held by our affiliates may be freely sold (subject to Rule 144 limitation),
sales of these shares could cause the market price of our common stock to drop
significantly, even if our business is performing well.




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-34.





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 or Rule 15d-15 of the
Securities Exchange Act of 1934 (or the “Exchange Act”) under the supervision
and with the participation of our management, including our Principal Executive
Officer and Principal Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures.




20




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





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





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





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) or 15d-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, 2008 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, 2008.





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.





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.





For the
year ending December 31, 2009, in addition to our financial statement audit, our
independent registered public accounting firm will audit our internal controls.
We have interviewed consulting firms and expect to retain a consulting firm in
2009 to assist us in preparing for that audit.





Changes in Internal Control
Over Financial Reporting





There were no changes in our internal
control over financial reporting during the fourth quarter of 2008 that have
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.





Item
      9B.
            Other
      Information.





None.




21


PART
III





Item
      10.
            Directors,
      Executive Officers and Corporate
Governance.




The following represents our current
Board of Directors and Executive Officers.





Name
            
            Age
            
            PositionMichael
      Mathews
            
            47
            
            Chief
      Executive Officer and DirectorDavid
      Garrity
            
            48
            
            Chief
      Financial Officer and DirectorMichael
      Katz
            
            30
            
            President
      and DirectorAndrew
      Katz
            
            28
            
            Chief
      Technology OfficerMichael
      Brauser
            
            53
            
            Co-Chairman
      of the BoardBarry
      Honig
            
            37
            
            Co-Chairman
      of the BoardSanford
      Rich
            
            51
            
            Director




Michael Mathewshas served as
our Chief Executive Officer and a member of our board of directors since the CAN
Merger on August 28, 2007. Mr. Mathews is one of the founders of CAN and has
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 interim Chief Financial Officer until David Garrity was
appointed.  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.





David Garrity, CFAhas served
as our Chief Financial Officer since June 30, 2008 and as a member of our board
of directors since June 9, 2008.  Through GVA Research LLC, a company
he controls, Mr. Garrity appears periodically as a stock market analyst on CNBC,
Bloomberg TV and other cable networks. From 2006 to 2008, Mr. Garrity served as
Managing Director and Director of Research for Dinosaur Securities, LLC. From
2005 through 2006, Mr. Garrity served as a Managing Director and Director of
Research for Hapoalim Securities USA, Inc. From 2004 to 2005, Mr. Garrity served
as a Managing Director, Market Strategist and Internet/IT Services Sector
Analyst for Caris & Company. From 2002 to 2004, Mr. Garrity served as a
Managing Director and IT Services Sector Analyst for American Technology
Research, an independent research firm of which he was a founding
partner.  Mr. Garrity graduated from the College of the Holy Cross and
holds a Masters in Business Administration from Northwestern University’s
Kellogg School of Management.  Since 1993, Mr. Garrity has been a Chartered
Financial Analyst and member of the CFA Institute.  Our Board has
determined that Mr. Garrity qualifies as an “Audit Committee Financial Expert,”
as defined by the rules of the SEC.





Michael Katz has served
as a director since August 31, 2007.  On that date, Mr. Katz was
appointed President.  From 2003 until the Desktop Merger in August
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.





Andrew Katz has served as our
Chief Technology Officer since the Company’s inception.  From February
2004 until July 1, 2008, Mr. Katz 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, the President
of the Company.




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. 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.) and
served as a member of its Board of Directors from 1999 through
2003.




22




Barry Honig has served as
Co-Chairman since August 28, 2007.  Since January 2004, Mr. Honig has
been the President of GRQ Consultants, Inc., an investor and consultant to early
stage companies.





Sanford Rich has served
as a director since August 28, 2007.  Since February 2009, Mr. Rich
has been a Managing Director with Whitemarsh Capital LLC, a
broker-dealer.  From May 2008 to February 2009, Mr. Rich was a
Managing Director with Matrix USA LLC, a broker-dealer. From 1995 until May
2008, Mr. Rich was the Senior Vice President of Investments, a Portfolio Manager
and a Specialist Manager of High Yield and Convertible Securities Portfolios for
institutions at GEM Capital Management, Inc. Since
April 2006, he has served as a director and Audit Committee Chairman for Health
Benefits Direct Corporation.





Key
Employee





Jason Lynnhas served as our
Vice President of Product Development since June 2008.  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.  He is 26 years old.





Committees
of the Board of Directors





Audit
Committee





Because
our Board of Directors is only comprised on one independent director, Mr.
Sanford Rich is the sole member of our Audit Committee.  Mr. Rich does
not believe that we have a fully functioning Audit Committee.  The
Company believes it is good corporate governance to have an Audit Committee and
has adopted an Audit Committee Charter which is filed as an exhibit to this
Report.  The Board of Directors intends to appoint independent
directors in the future to serve on the Audit Committee.





The
purpose of the Audit Committee is to review our accounting functions, operations
and management, our financial reporting process and the adequacy and
effectiveness of our internal controls. The Audit Committee represents the Board
in overseeing our financial reporting processes, and, as part of this
responsibility, Mr. Rich consults with our independent registered public
accountants and with personnel from our financial staff with respect to
corporate accounting, reporting and internal control practices. The Audit
Committee recommends to the Board the appointment of our independent registered
public accounting firm.





Our Board has determined that Sanford
Rich meets the independence standards for audit committee members under the SEC
and Nasdaq Stock Market independence standards for audit
committees.





Audit
Committee Financial Expert





The Board
has determined that Sanford Rich qualifies as an “Audit Committee Financial
Expert,” as defined by the rules of the SEC.





We expect
our Board of Directors, in the future, to appoint a nominating committee,
compensation committee and any other appropriate committees, and to adopt
charters relative to each such committee. Although not required, we intend to
appoint such persons to committees in order to meet the corporate governance
requirements imposed by the national securities exchanges. In order to meet this
goal, we intend to add additional independent directors.





Code
of Ethics





Our Board of Directors has adopted a
Code of Ethics that applies to all of our employees, including our Chief
Executive Officers 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 copy of the Code of Ethics is filed as an exhibit to this
Report.




23


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, 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





Not applicable.





Item
11.          Executive
Compensation.





The
following information is related to the compensation paid, distributed or
accrued by us for 2008 and 2007 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”).





2008
Summary Compensation Table





Name
      and
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            
                                            OptionPrincipal
      Position
                                            Year
                                            
                                            Salary
                                            
                                            
                                            Bonus
                                            
                                            
                                            Awards
                                            
                                            
                                            
                                            
                                            
                                            Total(a)
                                            (b)
                                            
                                            ($)(c)
                                            
                                            
                                            ($)(d)
                                            
                                            
                                            ($)(f)
                                            
                                            
                                            
                                            
                                            
                                            ($)(j)Michael
      Mathews
                                            2008
                                            
                                            $
                                            325,000
                                            
                                            
                                            $
                                            70,000
                                            
                                            
                                            $
                                            379,301
                                            
                                            
                                            
                                            (1
                                            )
                                            
                                            $
                                            774,301Chief
      Executive Officer
                                            2007
                                            
                                            $
                                            116,071
                                            
                                            
                                            $
                                            50,000
                                            
                                            
                                            $
                                            122,545
                                            
                                            
                                            
                                            (1
                                            )
                                            
                                            $
                                            288,616Michael
      Katz
                                            2008
                                            
                                            $
                                            250,000
                                            
                                            
                                            $
                                            112,615
                                            
                                            
                                            $
                                            50,162
                                            
                                            
                                            
                                            (1
                                            )
                                            
                                            $
                                            412,777President
                                            2007
                                            
                                            $
                                            116,896
                                            
                                            
                                            $
                                            0
                                            
                                            
                                            $
                                            16,721
                                            
                                            
                                            
                                            (1
                                            )
                                            
                                            $
                                            133,617Andrew
      Katz(2)
                                            2008
                                            
                                            $
                                            181,875
                                            
                                            
                                            $
                                            0
                                            
                                            
                                            $
                                            70,351
                                            
                                            
                                            
                                            (1
                                            )
                                            
                                            $
                                            252,226Chief
      Technology Officer
                                            2007
                                            
                                            $
                                            84,583
                                            
                                            
                                            $
                                            35,000
                                            
                                            
                                            $
                                            4,618
                                            
                                            
                                            
                                            (1
                                            )
                                            
                                            $
                                            124,201





(1)           Represents
the dollar amounts recognized in the Company’s year-end 2008 and 2007 financial
statements for reporting purposes in accordance with SFAS
123(R).  Amounts shown cover awards granted in 2008
and 2007.  The amounts represent the compensation costs of awards
that are paid in options to purchase shares of the Company’s common stock, the
amounts do not reflect the actual amounts that may be realized by the Named
Executive Officers.  A discussion of the assumptions used in
calculating these values may be found in Note 11 to the consolidated audited
financial statements.


(2)           Includes
200,000 options re-priced from $2.95 to $1.31 per share.




Executive
Officer Employment Agreements




Michael Mathews Employment
Agreement.  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 $325,000 in his first year of employment, currently
receives $340,000, and will receive $355,000 in his third year of employment,
respectively and then 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 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.  Additionally, we agreed to (i) pay his former
employer $100,000, (ii) pay a $50,000 relocation fee and (iii) guarantee a
$50,000 minimum bonus payment.  Mr. Mathews also received 1,400,000
shares of vested founders stock. Prior to the CAN merger, Mr. Mathews was
granted 1,350,000 stock options vesting in quarterly increments over three years
exercisable at $1.00 per share.  In the event that Mr. Mathews’s
employment is terminated without cause or for Good Reason, he will receive 18
months base salary and his unvested options will immediately
vest.  Additionally, upon a change of control of the Company all of
Mr. Mathew’s stock options granted under his employment agreement immediately
vest.




24




David Garrity Employment
Agreement.  On June 30, 2008, we entered into a two-year
employment agreement with David Garrity, to serve as our Chief Financial
Officer.  Mr. Garrity receives a $200,000 base salary (increased to
$235,000 effective February 1, 2009) and is eligible to receive 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 50% of his
base salary for that year.  Mr. Garrity received 405,000 five-year
stock options vesting quarterly over three years exercisable at $3.01 per
share.  On September 23, 2008, these options were repriced at $1.31
per share.  In the event that Mr. Garrity’s employment is terminated
without cause or for Good Reason, he will be entitled to six months base
salary.





Michael Katz Employment
Agreement. On August 31, 2007, we entered into an employment agreement
with Michael Katz, to serve as the President. Under the agreement, Mr. Katz was
to receive an annual base salary of $250,000. 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 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 percent 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.  Additionally, Mr.
Katz was granted 300,000 stock options vesting annually on each over a three
year period exercisable at $1.00 per share.  Mr. Katz, or his estate,
will receive 12 months base salary in the event his employment is terminated as
a result of death, disability, for Good Reason or if the Company does not offer
to renew the term of his employment by July 2, 2010.  In the event
that Mr. Katz’s employment is terminated without cause, for Good Reason, or the
Company does not renew his employment, any restricted stock or unvested stock
options held by Mr. Katz immediately vest.





Andrew Katz Employment
Agreement.  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, 2010
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
half payable in stock and half in cash.  If the performance milestone
is met, it shall equal 50% of his base salary for that
year.  Additionally, Mr. Katz was granted 200,000 stock options
exercisable at $2.95 per share vesting annually over four years beginning March
3, 2009.  On September 23, 2008, these options were repriced at $1.31
per share.  In the event that Mr. Katz’s employment is terminated
without cause or for Good Reason, he will receive six months base salary and his
unvested options will immediately vest. In March 2009, our Board approved the
payment of  a $56,250 bonus and the issuances to him of 56,250 shares of
restricted common stock vesting semi-annually over a four-year
period.





Where
applicable, Good Reason in the above agreements includes the diminution of the
executives’ duties, any reduction in compensation without consent or the
relocation of the Company’s principal office.  Additionally, Mr.
Michael Katz’s employment agreement includes a change in control of the Company
within the definition of Good Reason.




2008
Compensation Awards
 In
February 2009, our Board of Directors reviewed management compensation. Because
it had not set any performance goals for 2008, it elected to make discretionary
compensation awards. In February 2009, we granted Mr. Mathews 200,000 five-year
options fully vested and exercisable at $0.76 per share. Mr. Garrity was granted
20,000 five-year options fully vested and exercisable at $0.76 per share. Mr.
Michael Katz’s base salary was increased to $300,000. Additionally, we paid Mr.
Andrew Katz a $56,250 cash bonus and in March 2009 we awarded him 56,250 shares
of restricted common stock, which vest in equal increments semi-annually over a
four-year period beginning June 30, 2009 as long as he remains employed by us on
each applicable vesting date.


2007
Equity Incentive Plan and 2007 Incentive Stock and Award Plan




In August
2007, we established the Equity Plan under which we may issue up to 4,500,000
stock options and restricted stock to our directors, employees and
consultants.  On November 13, 2007, we adopted the Incentive Plan
covering an additional 1,000,000 shares upon the exercise of options and the
granting of restricted stock.  Both the Equity Plan and the Incentive
Plan are similar and are referred to below as the “Plans.”  As of
February 6, 2009, we amended the Incentive Plan to include an additional 225,000
options and shares of restricted stock.  In January 2009, we amended
the Plans to permit options to be transferable, except in limited circumstances
including Incentive Stock Options (“ISOs”) as defined by the Internal Revenue
Code.




25




Both
plans are to be administered by a Committee of two or more independent
directors, or in their absence by the Board. The identification of individuals
entitled to receive awards, the terms of the awards, and the number of shares
subject to individual awards, are determined by our Board or the Committee, in
their sole discretion. The total number of shares with respect to which options
or stock awards may be granted under the Plans and the purchase price per share,
if applicable, shall be adjusted for any increase or decrease in the number of
issued shares resulting from a recapitalization, reorganization, merger,
consolidation, exchange of shares, stock dividend, stock split, reverse stock
split, or other subdivision or consolidation of shares.




Both
Plans provide for the grant of ISOs or non-qualified options. For any ISOs
granted, the exercise price may not be less than 110% of the fair market value
in the case of 10% shareholders. Options granted under the Plans shall expire no
later than 10 years after the date of grant, except for ISOs granted to 10%
shareholders which must expire not later than five years from
grant.   The option price may be paid in United States dollars by
check or other acceptable instrument including wire transfer or, at the
discretion of the Board  or  Committee, by delivery of
shares of our common stock having fair market value equal as of the date of
exercise to the cash exercise price, or a combination thereof.




Our Board
or the Committee may from time to time alter, amend, suspend, or discontinue the
Plans with respect to any shares as to which awards of stock rights have not
been granted. However no rights granted with respect to any awards under the
Plans before the amendment or alteration shall not be impaired by any such
amendment, except with the written consent of the grantee.




Under the
terms of the Plans, our Board or the Committee may also grant awards which will
be subject to vesting under certain conditions. In the absence of  a
determination by the Board or Committee, options shall vest and be exercisable
at the end of one, two and three years, except for ISOs, which are subject to a
$100,000 per calendar year limit on  becoming first exercisable. The
vesting may be time-based or based upon meeting performance standards, or both.
Recipients of restricted stock awards will realize ordinary income at the time
of vesting equal to the fair market value of the shares. We will realize a
corresponding compensation deduction. Upon the exercise of stock options other
than ISOs, the holder will have a basis in the shares acquired equal to any
amount paid on exercise plus the amount of any ordinary income recognized by the
holder. For ISOs which meet certain requirements, the exercise is not taxable
upon sale of the shares, the holder will have a capital gain or loss equal to
the sale proceeds minus his or her basis in the shares.





The
following chart reflects the number of stock options we awarded in fiscal 2007
to 2009 to our executive officers and directors.





Name
                        
                        Number of
                          Options
                        
                        
                        Exercise Price per
                          Share
                        
                        Expiration DateMichael
      Mathews
                        
                        
                        1,450,000
                        
                        
                        
                        $ 
      1.00
                        
                        8/28/2012Michael
      Mathews
                        
                        
                        250,000
                        
                        
                        
                        $ 
      1.00
                        
                        10/12/2012Michael
      Mathews
                        
                        
                        200,000
                        
                        
                        
                        $ 
      0.76
                        
                        2/6/2014David
      Garrity
                        
                        
                        100,000
                        
                        
                        
                        $ 
      1.31
                        
                        6/9/2013David
      Garrity
                        
                        
                        405,000
                        
                        
                        
                        $ 
      1.31
                        
                        6/30/2013David
      Garrity
                        
                        
                        20,000
                        
                        
                        
                        $ 
      0.76
                        
                        2/6/2014Michael
      Katz
                        
                        
                        300,000
                        
                        
                        
                        $ 
      1.00
                        
                        8/31/2012Andrew
      Katz
                        
                        
                        100,000
                        
                        
                        
                        $ 
      1.00
                        
                        9/21/2012Andrew
      Katz
                        
                        
                        200,000
                        
                        
                        
                        $ 
      1.31
                        
                        6/16/2013Michael
      Brauser
                        
                        
                        100,000
                        
                        
                        
                        $ 
      1.00
                        
                        8/28/2012Barry
      Honig
                        
                        
                        100,000
                        
                        
                        
                        $ 
      1.00
                        
                        8/28/2012Sanford
      Rich
                        
                        
                        100,000
                        
                        
                        
                        $ 
      1.00
                        
                        8/28/2012





Outstanding
Equity Awards At 2008 Fiscal Year-End





Listed
below is information with respect to outstanding equity awards held by our Named
Executive Officers as of December 31, 2008:




26




Name
                                                              (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)Michael
      Mathews (1)
                                                            
                                                            
                                                            604,167
                                                            
                                                            
                                                            
                                                            845,833
                                                            
                                                            
                                                            
                                                            1.00
                                                            
                                                            08/28/12Chief
      Executive Officer (1)
                                                            
                                                            
                                                            83,333
                                                            
                                                            
                                                            
                                                            166,667
                                                            
                                                            
                                                            
                                                            1.00
                                                            
                                                            10/12/12Michael
      Katz (2)
                                                            
                                                            
                                                            75,000
                                                            
                                                            
                                                            
                                                            225,000
                                                            
                                                            
                                                            
                                                            1.00
                                                            
                                                            08/31/12PresidentAndrew
      Katz (2)
                                                            
                                                            
                                                            25,000
                                                            
                                                            
                                                            
                                                            75,000
                                                            
                                                            
                                                            
                                                            1.00
                                                            
                                                            09/21/12Chief
      Technology Officer (1)
                                                            
                                                            
                                                            0
                                                            
                                                            
                                                            
                                                            200,000
                                                            
                                                            
                                                            
                                                            1.31
                                                            
                                                            06/16/13





(1)
            These
      options vest quarterly over a three year
period.


(2)
            These
      options vest annually over a four year
period.





Compensation
of Directors





We do not
pay cash compensation to our directors for service on our Board of Directors.
Non-employee members of our Board of Directors were compensated with stock
options for service as a director as follows:





Name
                    (a)
                  
                  Option
                    Awards
                    ($)
                  
                  
                  Total
                    ($)Michael
      Brauser (1)
                  
                  $
                  22,289
                  
                  
                  $
                  22,289David
      Garrity (1)(2)
                  
                  $
                  26,915
                  
                  
                  $
                  26,915Barry
      Honig (1)
                  
                  $
                  22,289
                  
                  
                  $
                  22,289Sanford
      Rich (1)
                  
                  $
                  22,289
                  
                  
                  $
                  22,289










(1)           Represents
2007 grants of 100,000 options to each non-employee director, except for Mr.
Garrity.  Mr. Garrity received 100,000 options in June 2008 when he
became a director prior to becoming an employee.  All option grants to
our directors vest annually over four years.


(2)           On
September 23, 2008, these options were repriced from $2.998 to $1.31 per
share.


(3)           The
amounts reflect the accounting charge taken in 2008 for awards granted in 2008
and in prior years.  Accounting costs are determined, as required,
under FAS No. 123(R), “Share-Based Payment.” For a more detailed discussion
on the valuation model and assumptions used to calculate the fair value of our
options, refer to Note 11 to the consolidated financial statements.




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 interCLICK’s common stock
beneficially owned as of March 27, 2009 by (i) those persons known by interCLICK
to be owners of more than 5% of interCLICK’s common stock, (ii) each director,
(iii) all our Named Executive Officers and (iv) all executive officers and
directors as a group:





Title of Class
                
                Name and
                  Address of Beneficial Owner
                
                Number of Shares
                  Beneficially
                  Owned(1)
                
                Percent(1)Directors
      and Executive Officers:Common Stock
                
                Michael
      Mathews
                  257
      Park Avenue South Ste. 602
                  New
      York, NY 10010 (2)
                
                2,520,833
                
                6.5
                %Common
      Stock
                
                Michael
      Katz
                  257
      Park Avenue South Ste. 602
                  New
      York, NY 10010 (3)
                
                2,075,000
                
                5.5
                %Common
      Stock
                
                Andrew
      Katz
                  257
      Park Avenue South Ste. 602
                  New
      York, NY 10010 (4)
                
                131,250
                
                *Common
      Stock
                
                Michael
      Brauser
                  595
      S. Federal Hwy. Ste. 600
                  Boca
      Raton, FL 33432(5)
                
                7,273,000
                
                19.2
                %Common
      Stock
                
                David
      Garrity
                  257
      Park Avenue South Ste. 602
                  New
      York, NY 10010 (6)
                
                163,050
                
                *Common
      Stock
                
                Barry
      Honig
                  595
      S. Federal Hwy. Ste. 600
                  Boca
      Raton, FL 33432(7)
                
                7,031,500
                
                18.6
                %Common
      Stock
                
                Sanford
      Rich
                  950
      Third Avenue 22nd Floor
                  New
      York, NY 10022 (8)
                
                25,000
                
                *Common
      Stock
                
                All
      directors and executive officers
                  as
      a group (7 persons)
                
                19,219,633
                
                48.8
                %





*
            Less
      than 1%


(1)
            Applicable percentages
      are based on 37,845,167 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. 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, the Company 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)
            Includes
      1,170,833 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this
Report.


(3)
            Includes
      75,000 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this
Report.


(4)
            Includes
      75,000 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this Report and 56,250 shares of restricted
      common stock which vest semi-annually over a four year period beginning
      June 30, 2009.




28




(5)
            Includes
      25,000 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this Report.  Also includes: (i)
      4,485,500 shares held in a Partnership of which Mr. Brauser is the General
      Partner, (ii) 1,800,000 shares held jointly with his wife and (iii)
      950,000 shares held by a trust whereby his wife is the trustee and
      beneficiary.


(6)
            Includes
      121,250 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this Report.  Also includes shares
      held in Mr. Garrity's IRA
account.


(7)
            Includes
      25,000 shares issuable upon exercise of options that are exercisable
      within 60 days of the date of this Report.  Also includes shares
      held in a 401(K) plan whereby Mr. Honig is the
  trustee.


(8)
            Includes 25,000
      shares issuable upon exercise of options that are exercisable within 60
      days of the date of this
Report.




Item
13.          Certain
Relationships and Related Transactions, and Director Independence.




During this year and from the period
from June 14, 2007 (Inception) through December 31, 2007, we have engaged in
certain transactions in which some of our directors, executive officers and 10%
shareholders had a direct or indirect material interest, in which the amount
involved exceeded the lesser of $120,000 or 1% of the average of our total
assets for the last two completed fiscal years (not including employment
agreements with our management). These transactions are described
below.




In June 2007, Michael Brauser and Barry
Honig each loaned the Company $125,000 and were issued 8% convertible notes
exercisable at $0.50 per share.  Messrs. Brauser and Honig were
required to convert the notes upon the Company entering into a $2,000,000
financing arrangement.  On August 28, 2007, the shareholders converted
their notes and were issued 250,000 shares each.




In connection with the acquisition of
Desktop on August 31, 2007, the Company was obligated to pay an additional
$1,000,000 upon Desktop achieving certain revenue milestones.  On
October 5, 2007 and September 20, 2008, Michael Katz was paid $643,000 and
$357,000, respectively.




In connection with the sale of the
Longview Note, Barry Honig issued 150,000 shares of his personally owned common
stock of the company to the lenders which shares were valued at
 $802,500 for nominal consideration resulting in an expense to the
Company.




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, the Company
repaid the note issued to Mr. Honig.  On December 31, 2008, we paid
GRQ $250,000 in principal, and it extended the due date of its note from
December 31, 2008 to June 30, 2009.  As of the date of this Report,
the amount owed under the note is $400,000.





Item
      14.
            Principal
      Accounting Fees and Services.





Our Audit
Committee reviews and approves audit and permissible non-audit services
performed by its independent registered public accounting firm of Salberg &
Company, P.A., as well as the fees charged for such services. In its review of
non-audit service and its appointment of Salberg & Company, P.A. as the
Company’s independent registered public accounting firm, the Audit Committee
considered whether the provision of such services is compatible with maintaining
independence. All of the services provided and fees charged by Salberg &
Company, P.A. in 2008 were approved by the Audit Committee. The following table
shows the fees for the year ended December 31, 2008 and for the period from
inception, June 14, 2007 to December 31, 2007.





2008
                    
                    
                    2007Audit
      Fees (1)
                    
                    $
                    125,000
                    
                    
                    $
                    82,000Audit
      Related Fees (2)
                    
                    $
                    17,000
                    
                    
                    $
                    130,000Tax
      Fees
                    
                    $
                    0
                    
                    
                    $
                    0All
      Other Fees
                    
                    $
                    0
                    
                    
                    $
                    0


29


(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 period from June 14, 2007
      (Inception) to December 31, 2007 and for the year ended December 31, 2008
      were for professional services rendered for assistance with reviews of
      documents filed with the SEC primarily related to the 2007
      recapitalization and for audits of acquired companies in 2007 and
      2008.








30




PART
IV




Item
      15.
            Exhibits,
      Financial Statement Schedules.




(a)
Documents filed as part of the Report.




(1)




Consolidated
Balance Sheets at December 31, 2008 and 2007


Consolidated
Statements of Operations for the year ended December 31, 2008 and for the period
from June 14, 2007 (Inception) to December 31, 2007


Consolidated
Statements of Changes in Stockholders' Equity for the year ended December 31,
2008 and for the period from June 14, 2007 (Inception) to December 31,
2007


Consolidated
Statements of Cash Flows for the year ended December 31, 2008 and for the period
from June 14, 2007 (Inception) to December 31, 2007




(2)
Financial Statements Schedules




(3)
Exhibits




Certain
material agreements contain representations and warranties, which are qualified
by the following factors: (1) the representations and warranties contained in
any agreements filed with this Report were made for the purposes of allocating
contractual risk between the parties and not as a means of establishing facts;
(2) the agreement may have different standards of materiality than standards of
materiality under applicable securities laws; (3) the representations are
qualified by a confidential disclosure schedule that contains some nonpublic
information that is not material under applicable securities laws; (4) facts may
have changed since the date of the agreements; and (5) only parties to the
agreements and specified third-party beneficiaries have a right to enforce the
agreements.




No.
                      
                      Description
                      
                      Incorporated
      By Reference2.1
                      
                      Agreement
      of Merger and Plan of Reorganization, by and among Customer Acquisition
      Network Holdings, Inc., Customer Acquisition Network, Inc. and CAN
      Acquisition Sub, Inc.
                      
                      Form 8-K
      filed on September 4, 20072.2
                      
                      Agreement
      and Plan of Merger, by and among Customer Acquisition Network Holdings,
      Inc., Customer Acquisition Network, Inc., Desktop Acquisition Sub, Inc.,
      Desktop Interactive, Inc. and Michael Katz, Brandon Guttman and Stephen
      Guttman
                      
                      Form 8-K
      filed on September 4, 20072.3
                      
                      Certificate
      of Merger, merging Customer Acquisition Sub, Inc. with and into Customer
      Acquisition Network Inc.
                      
                      Form 8-K
      filed on September 4, 20072.4
                      
                      Certificate
      of Merger, merging Desktop Interactive, Inc. with and into Desktop
      Acquisition Sub, Inc.
                      
                      Form 8-K
      filed on September 4, 20072.5
                      
                      Agreement
      of Merger and Plan of Reorganization, by and among Options Media Group
      Holdings, Inc., Options Acquisition Corp., Options Acquisition Sub, Inc.
      and Customer Acquisition Network Holdings, Inc.
                      
                      Form
      8-K filed on June 27, 20082.6
                      
                      Certificate
      of Merger, merging Options Acquisition Corp. with and into Options
      Acquisition Sub, Inc.
                      
                      Form 8-K
      filed on September 4, 20073.1
                      
                      Amended
      and Restated Certificate of Incorporation
                      
                      Form
      8-K filed on August 30, 20073.2
                      
                      Certificate
      of Amendment to Certificate of Incorporation
                      
                      Form
      8-K filed on July 1, 20083.3
                      
                      Amended
      and Restated Bylaws
                      
                      Form
      8-K filed on August 30, 20074.1
                      
                      2007
      Equity Incentive Plan
                      
                      Form 8-K
      filed on September 4, 20074.2
                      
                      Form
      of 2007 Incentive Stock Option Agreement
                      
                      Form 8-K
      filed on September 4, 20074.3
                      
                      2007
      Incentive Stock and Award Plan
                      
                      Form
      8-K filed on November 16, 20074.4
                      
                      First
      Amendment to the 2007 Incentive Stock and Award Plan
                      
                      Filed
      with this Report4.5
                      
                      Promissory
      Notes issued to Barry Honig and GRQ Consultants, Inc.
                      
                      Form
      8-K filed on October 1, 200810.1
                      
                      Michael
      Mathews Employment Agreement
                      
                      Form 8-K
      filed on September 4, 200710.2
                      
                      Michael
      Katz Employment Agreement
                      
                      Form 8-K
      filed on September 4, 200710.3
                      
                      David
      Garrity Employment Agreement
                      
                      Form
      8-K filed on July 7, 200810.4
                      
                      Andrew
      Katz Employment Agreement
                      
                      Filed
      with this Report10.5
                      
                      Whalehaven
      Capital Fund Limited Subscription Agreement
                      
                      Form
      8-K filed on April 3, 200810.6
                      
                      Chestnut
      Ridge Capital LLC Subscription Agreement
                      
                      Form
      8-K filed on April 3, 200810.7
                      
                      Form
      of Subscription Agreement
                      
                      Form
      8-K filed on May 7, 200810.8
                      
                      Amendment
      to Securities Purchase Agreement with Alpha Capital
Anstalt
                      
                      Form
      8-K filed on May 7, 200810.9
                      
                      Whalehaven
      Capital Fund Limited Subscription Agreement
                      
                      Form
      8-K filed on May 19, 200810.10
                      
                      P.A.W.
      Long Term Partners, L.P. Subscription Agreement
                      
                      Form
      8-K filed on July 22,
2008




31


10.11
              
              Securities
      Purchase Agreement with Longview Marquis Master Fund, L.P.
              
              Form
      8-K filed on November 20, 200710.12
              
              Amendment
      to Securities Purchase Agreement with Longview Marquis Master Fund,
      L.P.
              
              Form
      8-K filed on June 2, 200810.13
              
              Second
      Amendment to Securities Purchase Agreement Longview Marquis Master Fund,
      L.P.
              
              Form
      8-K filed on June 18, 200810.14
              
              Letter
      Agreement with Longview Marquis Master Fund, L.P dated June 20,
      2008
              
              Form
      8-K filed on June 27, 200810.15
              
              Letter
      Agreement with Longview Marquis Master Fund, L.P dated August 29,
      2008
              
              Form
      8-K filed on September 5, 200810.16
              
              Placement
      Agent Agreement with Dinosaur Securities LLC
              
              Form
      8-K filed on June 13, 200810.17
              
              Stephen
      B. Wechsler Subscription Agreement
              
              Form
      8-K filed on June 18, 200810.18
              
              Stock
      Pledge Agreement with Barry Honig and GRQ Consultants,
Inc.
              
              Form
      8-K filed on October 1, 200810.19
              
              Letter
      Agreement with Barry Honig and GRQ Consultants, Inc.
              
              Filed
      with this Report10.20
              
              Security
      Agreement with Silicon Valley Bank Loan
              
              Form
      8-K filed on October 15, 200810.21
              
              Letter
      Agreement with Silicon Valley Bank
              
              Form
      8-K filed on December 3, 200810.22
              
              Settlement
      and Release Agreement with Hagai Schecter
              
              Filed
      with this Report10.23
              
              Accounts
      Receivable Financing Agreement with Crestmark Commercial Capital Lending
      LLC
              
              Filed
      with this Report10.24
              
              Amendment
      to the Accounts Receivable Financing Agreement with Crestmark Commercial
      Capital Lending LLC
              
              Filed
      with this Report10.25
              
              Letter
      Agreement with Crestmark Commercial Capital Lending LLC increasing Line of
      Credit
              
              Filed
      with this Report10.26
              
              Second
      Amendment to the Accounts Receivable Financing Agreement with Crestmark
      Commercial Capital Lending LLC
              
              Filed
      with this Report14.1
              
              Code
      of Ethics
              
              Form
      10-K filed on April 15, 200821.1
              
              List
      of Subsidiaries
              
              Form
      10-K filed on April 15, 200831.1
              
              Certification
      of Principal Executive Officer (Section 302)
              
              Furnished
      with this Report31.2
              
              Certification
      of Principal Financial Officer (Section 302)
              
              Furnished
      with this Report32.1
              
              Certification
      of Principal Executive Officer (Section 906)
              
              Filed
      with this Report32.2
              
              Certification
      of Principal Financial Officer (Section 906)
              
              Filed
      with this Report99.1
              
              Audit
      Committee Charter
              
              Filed
      with this Report







32




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, 2009


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/
      David Garrity
                  
                  Chief
      Financial Officer (Principal Financial Officer and Chief Accounting
      Officer)
                  
                  March
      31, 2009David
      Garrity/s/
      Michael
      Brauser
                  
                  Co-Chairman
                  
                  March
      31, 2009Michael
      Brauser/s/
      Barry Honig
                  
                  Co-Chairman
                  
                  March
      31, 2009Barry
      Honig/s/
      Michael Katz
                  
                  Director
                  
                  March
      31, 2009Michael
      Katz/s/
      Michael Mathews
                  
                  Director
                  
                  March
      31, 2009Michael
      Mathews/s/
      Sanford
      Rich
                  
                  Director
                  
                  March
      31, 2009Sanford
      Rich





33




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


CONSOLIDATED
BALANCE SHEETS


DECEMBER
31, 2008 AND 2007





Interclick,
Inc. (Formerly Customer Acquisition Network Holdings, Inc.) Index to
Consolidated Financial Statements




PageInterclick,
      Inc. (Formerly Customer Acquisition Network Holdings, Inc.)
      Consolidated Financial StatementsReport
      of Salberg & Company, P.A., Independent Registered Public Accounting
      Firm
                    
                    
                    F-2Consolidated
      Balance Sheets at December 31, 2008 and 2007
                    
                    
                    F-3Consolidated
      Statements of Operations for the year ended December 31, 2008 and for the
      period from June 14, 2007 (Inception) to December 31,
      2007
                    
                    
                    F-4Consolidated
      Statements of Changes in Stockholders' Equity for the year ended December
      31, 2008 and for the period from June 14, 2007 (Inception) to
      December 31, 2007
                    
                    
                    F-5Consolidated
      Statements of Cash Flows for the year ended December 31, 2008 and for the
      period from June 14, 2007 (Inception) to December 31,
      2007
                    
                    
                    F-6Notes
      to Consolidated Financial Statements
                    
                    
                    F-8





F-1





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 sheets of interCLICK, Inc. and
Subsidiary as of December 31, 2008 and 2007, and the related consolidated
statements of operations, changes in stockholders' equity, and cash flows for
the year ended December 31, 2008 and for the period from June 14, 2007
(Inception) to December 31, 2007. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated financial statements based on our
audits.





We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits 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 audits provide 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 2007, and the consolidated
results of its operations and its cash flows for the year ended December 31,
2008 and for the period from June 14, 2007 (Inception) to December 31, 2007, 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 $3,029,210 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.





SALBERG
& COMPANY, P.A.


Boca
Raton, Florida


March 19,
2009


F-2
  INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 CONSOLIDATED
BALANCE SHEETS
 DECEMBER
31, 2008 AND 2007
  December
      31, 2008
                                        
                                        
                                        December
      31, 2007AssetsCurrent
      assets:Cash
      and cash equivalents
                                        
                                        $
                                        183,871
                                        
                                        
                                        $
                                        3,675,483Accounts
      receivable, net of allowance of $425,000 and $150,000,
      respectively
                                        
                                        
                                        7,120,311
                                        
                                        
                                        
                                        3,390,302Due
      from factor
                                        
                                        
                                        637,705
                                        
                                        
                                        
                                        -Prepaid
      expenses and other current assets
                                        
                                        
                                        94,164
                                        
                                        
                                        
                                        55,750Total
      current assets
                                        
                                        
                                        8,036,051
                                        
                                        
                                        
                                        7,121,535Property
      and equipment, net
                                        
                                        
                                        596,913
                                        
                                        
                                        
                                        512,031Intangible
      assets, net
                                        
                                        
                                        610,113
                                        
                                        
                                        
                                        1,028,621Goodwill
                                        
                                        
                                        7,909,571
                                        
                                        
                                        
                                        7,909,571Investment
      in available-for-sale marketable securities
                                        
                                        
                                        1,650,000
                                        
                                        
                                        
                                        -Deferred
      debt issue costs, net of accumulated amortization of $6,667 and $13,932,
      respectively
                                        
                                        
                                        33,333
                                        
                                        
                                        
                                        77,505Deferred
      acquisition costs
                                        
                                        
                                        -
                                        
                                        
                                        
                                        129,333Other
      assets
                                        
                                        
                                        191,664
                                        
                                        
                                        
                                        66,937Total
      assets
                                        
                                        $
                                        19,027,645
                                        
                                        
                                        $
                                        16,845,533Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Liability
      on transferred accounts receivable
                                        
                                        $
                                        3,188,425
                                        
                                        
                                        $
                                        -Senior
      secured notes payable - related party
                                        
                                        
                                        400,000
                                        
                                        
                                        
                                        -Payable
      and promissory note settlement liability
                                        
                                        
                                        248,780
                                        
                                        
                                        
                                        -Senior
      secured notes payable, net of debt discount of$0 and $1,127,084,
      respectively
                                        
                                        
                                        -
                                        
                                        
                                        
                                        3,872,916Accounts
      payable
                                        
                                        
                                        5,288,807
                                        
                                        
                                        
                                        2,499,604Accrued
      expenses
                                        
                                        
                                        310,685
                                        
                                        
                                        
                                        1,046,719Accrued
      interest
                                        
                                        
                                        16,948
                                        
                                        
                                        
                                        36,173Obligations
      under capital leases, current portion
                                        
                                        
                                        10,615
                                        
                                        
                                        
                                        9,290Deferred
      revenue
                                        
                                        
                                        9,972
                                        
                                        
                                        
                                        -Total
      current liabilities
                                        
                                        
                                        9,474,232
                                        
                                        
                                        
                                        7,464,702Obligations
      under capital leases, net of current portion
                                        
                                        
                                        9,495
                                        
                                        
                                        
                                        19,317Deferred
      rent
                                        
                                        
                                        72,696
                                        
                                        
                                        
                                        -Total
      liabilities
                                        
                                        
                                        9,556,423
                                        
                                        
                                        
                                        7,484,019Commitments
      and contingencies (Note 12)Stockholders’
      equity:Preferred
      stock, $0.001 par value; 10,000,000 shares authorized, zero shares issued
      and outstanding
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Common
      stock, $0.001 par value; 140,000,000 shares authorized, 37,845,167
      and  34,979,667 issued and outstanding,
    respectively
                                        
                                        
                                        37,846
                                        
                                        
                                        
                                        34,980Additional
      paid-in capital
                                        
                                        
                                        24,889,586
                                        
                                        
                                        
                                        12,737,982Deferred
      consulting
                                        
                                        
                                        -
                                        
                                        
                                        
                                        (178,481
                                        )Accumulated
      other comprehensive loss
                                        
                                        
                                        (197,704
                                        )
                                        
                                        
                                        -Accumulated
      deficit
                                        
                                        
                                        (15,258,506
                                        )
                                        
                                        
                                        (3,232,967
                                        )Total
      stockholders’ equity
                                        
                                        
                                        9,471,222
                                        
                                        
                                        
                                        9,361,514Total
      liabilities and stockholders’ equity
                                        
                                        $
                                        19,027,645
                                        
                                        
                                        $
                                        16,845,533
  The
accompanying notes are an integral part of these consolidated financial
statements.
  F-3
  INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF OPERATIONS
 FOR
THE YEAR ENDED DECEMBER 31, 2008 AND FOR THE PERIOD FROM JUNE 14, 2007
(INCEPTION) TO
 DECEMBER
31, 2007
 
 For
      the periodFor
      the
                  
                  
                  from
      June 14, 2007Year
      Ended
                  
                  
                  (Inception)
      toDecember
      31, 2008
                  
                  
                  December
      31, 2007Revenues
                  
                  $
                  22,452,333
                  
                  
                  $
                  6,654,768Cost
      of revenue
                  
                  
                  15,344,337
                  
                  
                  
                  5,315,418Gross
      profit
                  
                  
                  7,107,996
                  
                  
                  
                  1,339,350Operating
      expenses:General
      and administrative (includes stock-based compensation
      of  $1,941,191 and $954,167, respectively)
                  
                  
                  6,269,070
                  
                  
                  
                  2,442,705Sales
      and marketing
                  
                  
                  4,884,973
                  
                  
                  
                  1,073,884Technology
      support
                  
                  
                  1,061,182
                  
                  
                  
                  748,968Merger,
      acquisition, and divestiture costs
                  
                  
                  652,104
                  
                  
                  
                  187,353Amortization
      of intangible assets
                  
                  
                  418,508
                  
                  
                  
                  302,062Bad
      debt expense
                  
                  
                  414,737
                  
                  
                  
                  116,055Total
      operating expenses
                  
                  
                  13,700,574
                  
                  
                  
                  4,871,027Operating
      loss from continuing operations
                  
                  
                  (6,592,578
                  )
                  
                  
                  (3,531,677
                  )Other
      income (expense):Interest
      income
                  
                  
                  17,095
                  
                  
                  
                  36,727Loss
      on settlement of debt
                  
                  
                  (20,121
                  )
                  
                  
                  -Loss
      on sale of available-for-sale securities, net
                  
                  
                  (116,454
                  )
                  
                  
                  -Loss
      on disposal of fixed assets
                  
                  
                  (13,635
                  )
                  
                  
                  -Interest
      expense
                  
                  
                  (1,526,298
                  )
                  
                  
                  (276,017
                  )Total
      other income (expense)
                  
                  
                  (1,659,413
                  )
                  
                  
                  (239,290
                  )Loss
      from continuing operations before income taxes
                  
                  
                  (8,251,991
                  )
                  
                  
                  (3,770,967
                  )Income
      tax benefit
                  
                  
                  1,687,305
                  
                  
                  
                  538,000Loss
      from continuing operations before equity investment
                  
                  
                  (6,564,686
                  )
                  
                  
                  (3,232,967
                  )Equity
      in investee's loss, net of income taxes
                  
                  
                  (653,231
                  )
                  
                  
                  -Loss
      from continuing operations
                  
                  
                  (7,217,917
                  )
                  
                  
                  (3,232,967
                  )Discontinued
      operations:Loss
      from discontinued operations, net of income tax benefit of $1,016,292
      (includes stock-based compensation of $1,121,818)
                  
                  
                  (1,235,940
                  )
                  
                  
                  -Loss
      on sale of discontinued operations, net of income tax provision of
      $2,439,597
                  
                  
                  (3,571,682
                  )
                  
                  
                  -Loss
      from discontinued operations, net
                  
                  
                  (4,807,622
                  )
                  
                  
                  -Net
      loss
                  
                  
                  (12,025,539
                  )
                  
                  
                  (3,232,967
                  )Other
      comprehensive loss:Unrealized
      loss on available-for-sale securities
                  
                  
                  (197,704
                  )
                  
                  
                  -Total
      other comprehensive loss
                  
                  
                  (197,704
                  )
                  
                  
                  -Comprehensive
      loss
                  
                  $
                  (12,223,243
                  )
                  
                  $
                  (3,232,967
                  )Loss
      per share from continuing operations - basic and diluted
                  
                  $
                  (0.19
                  )
                  
                  $
                  (0.12
                  )Loss
      per share from discontinued operations - basic and diluted
                  
                  $
                  (0.13
                  )
                  
                  $
                  -Net
      loss per share - basic and diluted
                  
                  $
                  (0.32
                  )
                  
                  $
                  (0.12
                  )Weighted
      average shares outstanding - basic and diluted
                  
                  
                  37,137,877
                  
                  
                  
                  28,025,035
  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 CHANGES IN STOCKHOLDERS’ EQUITY
 FOR
THE YEAR ENDED DECEMBER 31, 2008 AND FOR THE PERIOD FROM JUNE 14, 2007
(INCEPTION) TO DECEMBER 31, 2007
 
 AccumulatedAdditional
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        Other
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        
                                                                        TotalCommon
      Stock
                                                                        
                                                                        
                                                                        Paid-In
                                                                        
                                                                        
                                                                        Deferred
                                                                        
                                                                        
                                                                        Comprehensive
                                                                        
                                                                        
                                                                        Accumulated
                                                                        
                                                                        
                                                                        Stockholders'Stock
                                                                        
                                                                        
                                                                        Amount
                                                                        
                                                                        
                                                                        Capital
                                                                        
                                                                        
                                                                        Consulting
                                                                        
                                                                        
                                                                        Loss
                                                                        
                                                                        
                                                                        Deficit
                                                                        
                                                                        
                                                                        EquityBalance,
      June 14, 2007 (Inception)
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        -Issuance
      of common stock to founders and officers
                                                                        
                                                                        
                                                                        16,600,000
                                                                        
                                                                        
                                                                        
                                                                        16,600
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        16,600Recapitalization
      and split-off
                                                                        
                                                                        
                                                                        6,575,000
                                                                        
                                                                        
                                                                        
                                                                        6,575
                                                                        
                                                                        
                                                                        
                                                                        (6,575
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Common
      stock and warrants issued for cash, net of offering costs of
      $139,453
                                                                        
                                                                        
                                                                        7,138,000
                                                                        
                                                                        
                                                                        
                                                                        7,138
                                                                        
                                                                        
                                                                        
                                                                        6,991,409
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,998,547Issuance
      of common stock in connection with Desktop Interactive, Inc.
      merger
                                                                        
                                                                        
                                                                        3,500,000
                                                                        
                                                                        
                                                                        
                                                                        3,500
                                                                        
                                                                        
                                                                        
                                                                        3,496,500
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        3,500,000Conversion
      of convertible notes to common stock
                                                                        
                                                                        
                                                                        500,000
                                                                        
                                                                        
                                                                        
                                                                        500
                                                                        
                                                                        
                                                                        
                                                                        249,500
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        250,000Warrants
      granted for professional services
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        861,722
                                                                        
                                                                        
                                                                        
                                                                        (861,722
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Issuance
      of common stock in connection with settlement of certain
      liabilities
                                                                        
                                                                        
                                                                        66,667
                                                                        
                                                                        
                                                                        
                                                                        67
                                                                        
                                                                        
                                                                        
                                                                        66,600
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        66,667Exercise
      of warrants
                                                                        
                                                                        
                                                                        600,000
                                                                        
                                                                        
                                                                        
                                                                        600
                                                                        
                                                                        
                                                                        
                                                                        5,400
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        6,000Stock
      options expense
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        270,926
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        270,926Issuance
      of common stock in connection with issuance of notes
    payable
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        802,500
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        802,500Amortization
      of deferred consulting - warrants
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        683,241
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        683,241Net
      loss, June 14, 2007 (Inception) to December 31, 2007
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (3,232,967
                                                                        )
                                                                        
                                                                        
                                                                        (3,232,967
                                                                        )Balance,
      December 31, 2007
                                                                        
                                                                        
                                                                        34,979,667
                                                                        
                                                                        
                                                                        
                                                                        34,980
                                                                        
                                                                        
                                                                        
                                                                        12,737,982
                                                                        
                                                                        
                                                                        
                                                                        (178,481
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        (3,232,967
                                                                        )
                                                                        
                                                                        
                                                                        9,361,514Issuance
      of Common Stock in connection with Options Media Group
    merger
                                                                        
                                                                        
                                                                        1,000,000
                                                                        
                                                                        
                                                                        
                                                                        1,000
                                                                        
                                                                        
                                                                        
                                                                        5,716,273
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        5,717,273Issuance
      of Warrant in connection with Options Media Group merger
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        29,169
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        29,169Common
      stock and warrants issued for cash, net of offering costs of
      $87,500
                                                                        
                                                                        
                                                                        1,425,000
                                                                        
                                                                        
                                                                        
                                                                        1,425
                                                                        
                                                                        
                                                                        
                                                                        2,911,075
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        2,912,500Common
      stock and warrants issued per price protection clause
                                                                        
                                                                        
                                                                        75,000
                                                                        
                                                                        
                                                                        
                                                                        75
                                                                        
                                                                        
                                                                        
                                                                        (75
                                                                        )
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -Common
      stock and warrants issued to settle debt
                                                                        
                                                                        
                                                                        305,500
                                                                        
                                                                        
                                                                        
                                                                        306
                                                                        
                                                                        
                                                                        
                                                                        610,694
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        611,000Common
      stock issued for services
                                                                        
                                                                        
                                                                        60,000
                                                                        
                                                                        
                                                                        
                                                                        60
                                                                        
                                                                        
                                                                        
                                                                        188,940
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        -
                                                                        
                                                                        
                                                                        
                                                                        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
                                                                        
                                                                        
                                                                        37,845,167
                                                                        
                                                                        
                                                                        $
                                                                        37,846
                                                                        
                                                                        
                                                                        $
                                                                        24,889,586
                                                                        
                                                                        
                                                                        $
                                                                        -
                                                                        
                                                                        
                                                                        $
                                                                        (197,704
                                                                        )
                                                                        
                                                                        $
                                                                        (15,258,506
                                                                        )
                                                                        
                                                                        $
                                                                        9,471,222
 
 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 CASH FLOWS
 FOR
THE YEAR ENDED DECEMBER 31, 2008 AND FOR THE PERIOD FROM JUNE 14, 2007
(INCEPTION) TO DECEMBER 31, 2007
 
 For
      the periodFor
      the
                  
                  
                  from
      June 14, 2007Year
      Ended
                  
                  
                  (Inception)
      toDecember
      31, 2008
                  
                  
                  December
      31, 2007Cash
      flows from operating activities:Net
      loss
                  
                  $
                  (12,025,539
                  )
                  
                  $
                  (3,232,967
                  )Add
      back loss from discontinued operations, net
                  
                  
                  4,807,622
                  
                  
                  
                  -Loss
      from continuing operations
                  
                  
                  (7,217,917
                  )
                  
                  
                  (3,232,967
                  )Adjustments
      to reconcile net loss from continuing operations to net cash used in
      operating activities:Stock-based
      compensation
                  
                  
                  2,695,528
                  
                  
                  
                  954,167Amortization
      of debt discount
                  
                  
                  1,239,061
                  
                  
                  
                  225,416Equity
      method pick up from investment
                  
                  
                  653,231
                  
                  
                  
                  -Amortization
      of intangible assets
                  
                  
                  418,508
                  
                  
                  
                  301,379Provision
      for bad debts
                  
                  
                  414,737
                  
                  
                  
                  116,055Depreciation
                  
                  
                  245,489
                  
                  
                  
                  44,896Common
      stock issued for services
                  
                  
                  189,000
                  
                  
                  
                  -Amortization
      of deferred consulting
                  
                  
                  178,481
                  
                  
                  
                  -Loss
      on sales of investment in marketable securities
                  
                  
                  116,454
                  
                  
                  
                  -Write
      off of deferred acquisition costs
                  
                  
                  96,954
                  
                  
                  
                  -Amortization
      of debt issue costs
                  
                  
                  44,172
                  
                  
                  
                  13,932Loss
      on settlement of debt
                  
                  
                  20,121
                  
                  
                  
                  -Loss
      on disposal of property and equipment
                  
                  
                  13,635
                  
                  
                  
                  -Changes
      in operating assets and liabilities:Increase
      in accounts receivable
                  
                  
                  (4,144,746
                  )
                  
                  
                  (1,785,866
                  )Increase
      in prepaid expenses and other current assets
                  
                  
                  (38,414
                  )
                  
                  
                  (55,750
                  )Increase
      in other assets
                  
                  
                  (124,727
                  )
                  
                  
                  (31,064
                  )Increase
      in accounts payable
                  
                  
                  2,843,814
                  
                  
                  
                  955,235(Decrease)
      increase in accrued expenses
                  
                  
                  (736,034
                  )
                  
                  
                  219,163(Decrease)
      increase in accrued interest
                  
                  
                  (19,225
                  )
                  
                  
                  36,173Increase
      in deferred revenue
                  
                  
                  9,972
                  
                  
                  
                  -Increase
      in deferred rent
                  
                  
                  72,696
                  
                  
                  
                  -Net
      cash used in operating activities
                  
                  
                  (3,029,210
                  )
                  
                  
                  (2,239,231
                  )Cash
      flows from investing activities:Purchases
      of property and equipment
                  
                  
                  (357,006
                  )
                  
                  
                  (464,371
                  )Proceeds
      from sales of property and equipment
                  
                  
                  13,000
                  
                  
                  
                  -Acquisition
      of business, net of cash acquired
                  
                  
                  -
                  
                  
                  
                  (5,120,540
                  )Proceeds
      from sales of investment in marketable securities
                  
                  
                  1,078,000
                  
                  
                  
                  -Deferred
      acquisition costs
                  
                  
                  (10,619
                  )
                  
                  
                  (129,333
                  )Net
      cash provided by (used in) investing activities
                  
                  
                  723,375
                  
                  
                  
                  (5,714,244
                  )Cash
      flows from financing activities:Proceeds
      from issuance of notes payable
                  
                  
                  1,300,000
                  
                  
                  
                  4,450,000Principal
      payments on notes payable
                  
                  
                  (5,423,573
                  )
                  
                  
                  -Proceeds
      from common stock and warrants issued for cash
                  
                  
                  2,912,500
                  
                  
                  
                  6,998,547Proceeds
      from factor, net
                  
                  
                  2,550,720
                  
                  
                  
                  -Debt
      issue costs
                  
                  
                  -
                  
                  
                  
                  (91,438
                  )Proceeds
      from convertible promissory notes
                  
                  
                  -
                  
                  
                  
                  250,000Proceeds
      from issuance of common stock to founders
                  
                  
                  -
                  
                  
                  
                  16,600Proceeds
      from exercise of warrants
                  
                  
                  -
                  
                  
                  
                  6,000Principal
      payments on capital leases
                  
                  
                  (8,497
                  )
                  
                  
                  (751
                  )Net
      cash provided by financing activities
                  
                  
                  1,331,150
                  
                  
                  
                  11,628,958Cash
      flows from discontinued operations:Cash
      flows from operating activities
                  
                  
                  (1,933,382
                  )
                  
                  
                  -Cash
      flows from investing activities-acquisition
                  
                  
                  (1,885,624
                  )
                  
                  
                  -Cash
      flows from investing activities-divestiture
                  
                  
                  1,302,079
                  
                  
                  
                  -Net
      cash used in discontinued operations
                  
                  
                  (2,516,927
                  )
                  
                  
                  -Net
      (decrease) increase in cash and cash equivalents
                  
                  
                  (3,491,612
                  )
                  
                  
                  3,675,483Cash
      and cash equivalents at beginning of period
                  
                  
                  3,675,483
                  
                  
                  
                  -Cash
      and cash equivalents at end of period
                  
                  $
                  183,871
                  
                  
                  $
                  3,675,483
 
 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 YEAR ENDED DECEMBER 31, 2008 AND FOR THE PERIOD FROM JUNE 14, 2007
(INCEPTION) TO DECEMBER 31, 2007
 
 For
      the periodFor
      the
                    
                    
                    from
      June 14, 2007Year
      Ended
                    
                    
                    (Inception)
      toDecember
      31, 2008
                    
                    
                    December
      31, 2007Supplemental
      disclosure of cash flow information:Interest
      paid
                    
                    $
                    261,796
                    
                    
                    $
                    -Income
      taxes paid
                    
                    $
                    -
                    
                    
                    $
                    -Non-cash
      investing and financing activities:Issuance
      of common stock and warrants in business combination
                    
                    $
                    5,746,442
                    
                    
                    $
                    3,500,000Issuance
      of common stock and warrants in debt settlement
                    
                    $
                    611,000
                    
                    
                    $
                    -Unrealized
      loss on available-for-sale securities
                    
                    $
                    197,704
                    
                    
                    $
                    -Issuance
      of common stock for deferred services rendered
                    
                    $
                    189,000
                    
                    
                    $
                    -Issuance
      of shares of investment in marketable securities to settle accounts
      payable
                    
                    $
                    54,611
                    
                    
                    $
                    -Issuance
      of common stock in connection with issuance of senior secured notes
      payable
                    
                    $
                    -
                    
                    
                    $
                    802,500Conversion
      of convertible notes
                    
                    $
                    -
                    
                    
                    $
                    250,000Common
      stock issued in settlement of accounts payable
                    
                    $
                    -
                    
                    
                    $
                    66,667Capital
      lease obligation and related equipment
                    
                    $
                    -
                    
                    
                    $
                    29,358
  The
accompanying notes are an integral part of these consolidated financial
statements.
  F-7
  INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Note 1. Nature of
Operations
 
 Overview
  Customer
Acquisition Network, Inc. was formed in Delaware on June 14, 2007.
  Outsiders
Entertainment, Inc. was incorporated on March 4, 2002, under the laws of the
State of Delaware. On August 28, 2007, the name was changed to Customer
Acquisition Network Holdings, Inc.  On June 25, 2008, the name was
changed to interCLICK, Inc.
  On August
28, 2007, Customer Acquisition Network Holdings, Inc. ("Holdings") entered into
an Agreement and Plan of Merger and Reorganization (the “CAN Merger Agreement”)
by and among Holdings, Customer Acquisition Network, Inc. ("CAN"), and CAN
Acquisition Sub Inc., a newly formed, wholly-owned Delaware subsidiary of
Holdings (“CAN Acquisition Sub”). The merger transaction contemplated under the
CAN Merger Agreement (the “CAN Merger”) was consummated on August 28, 2007, at
which time CAN Acquisition Sub was merged with and into CAN, and CAN, as the
surviving corporation, became a wholly-owned subsidiary of
Holdings.
 
 Merger
with Customer Acquisition Network Holdings, Inc.
  On August
28, 2007, Holdings entered into the CAN Merger Agreement by and among Holdings,
CAN and CAN Acquisition Sub. Upon closing of the CAN Merger, CAN Acquisition Sub
merged with and into CAN, and CAN, as the surviving corporation, became a
wholly-owned subsidiary of Holdings. Prior to the CAN Merger, Holdings’ name was
changed to Customer Acquisition Network Holdings, Inc. and Holdings effected a
10.9583333333 -for-1 forward stock split of its common stock (the “Stock
Split”). All share and per share data in the accompanying consolidated financial
statements have been adjusted retroactively for the effect of the
recapitalization and subsequent stock split.
  At the
closing of the CAN Merger, each share of CAN's common stock issued and
outstanding, 24,238,000 immediately prior to the closing of the CAN Merger, was
converted into the right to receive one share of Holdings’ common stock. In
addition, pursuant to the CAN Merger Agreement and under the terms of an
attendant Agreement of Conveyance, Transfer and Assignment of Assets and
Assumption of Obligations, Holdings transferred all of its pre- CAN Merger
assets and liabilities to its newly formed wholly owned subsidiary, Outsiders
Entertainment Holdings, Inc. (“Splitco”). Subsequently, Holdings transferred all
of its outstanding capital stock of Splitco to a major stockholder of Holdings
in exchange for cancellation of all shares of Holdings’ common stock held by
such shareholder (the “Split-off”). The remaining shares outstanding (6,575,000,
excluding the Holdings shares issued to CAN’s shareholders as a result of the
CAN Merger), represented the surviving “Public Float” shares.
 
 Recapitalization
  Prior to
the closing of the CAN Merger, Holdings had limited operations and net assets.
At the same time, CAN had significantly more capital than Holdings and had
commenced certain publishing/advertising operations. In addition, as discussed
above, after the closing of the CAN Merger, Holdings consummated the Desktop
Merger and effected the Split-off. As a result of these facts and the former
shareholders of CAN obtaining voting and management control of the combined
entity, the CAN Merger is considered and accounted for as a recapitalization of
CAN, with CAN being considered as the acquirer and Holdings the acquiree for
accounting purposes. Accordingly, the Company’s financial statements for periods
prior to the CAN Merger become those of the accounting acquirer, retroactively
restated for the equivalent number of shares received in the CAN Merger.
Operations prior to the CAN Merger are those of CAN and earnings per share for
the period prior to the CAN Merger are restated to reflect the equivalent number
of shares outstanding.
  On a
recapitalized basis, as of December 31, 2007, upon the closing of the CAN Merger
and reflecting the effects of the Split off, Desktop Acquisition and other
issuances of shares, there were 34,979,667 total shares outstanding as of
December 31, 2007 of which 6,575,000 shares represent the Public Float (See Note
11).
 
 Merger
with Desktop Interactive, Inc.
  On August
31, 2007, Holdings entered into and consummated an Agreement and Plan of Merger
(the “Desktop Merger”), wherein Holdings acquired 100% of Desktop Interactive,
Inc. (“Desktop”), a privately held Delaware corporation engaged in the internet
advertising business. The initial merger consideration (the “Merger
Consideration”) consisted of $4.0 million in cash and 3.5 million shares of
Holdings’ stock valued at $1 per share, for a total initial purchase price of
$7.5 million. In addition, Holdings also incurred legal and other fees
associated with the Desktop Merger of approximately $359,799, agreed to pay a
past service bonus of $200,000 and subsequently paid an earn-out payment of
$643,000, for a total purchase price of $8,702,799.
  F-8
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 During
the period from the issue date to the effective date of a resale registration
statement which includes such shares or until a date the sellers are able to
dispose of such shares without restriction and pursuant to the termination of a
lock-up period (discussed below) if the parent sells or grants any option to
purchase or sells or grants any right to reprice common stock or common
stock equivalents at a price below $1.00 the Company shall issue additional
shares to the seller as anti-dilution protection to ensure the value of such
total stock based consideration value at $3,500,000.
  The
shares of Holdings’ stock issued in conjunction with the Desktop
Merger were subject to a 12-month lockup beginning August 31, 2007. The
3,500,000 shares also contain registration rights whereby the Company shall
register the shares on or before the 24-month anniversary of the closing date or
August 31, 2009 (effectiveness deadline) and maintain effectiveness until all
stock is sold under the registration statement or Rule 144. Upon a default of
effectiveness or maintenance of effectiveness as further defined in the
shareholder rights letter the Company shall pay liquidated damages of $0.79 per
1,000 shares held per day for the first 30 days and thereafter at a rate of
$1.32 per 1,000 shares held per day for each subsequent 30 day period until such
default is cured.
  In
addition to the initial merger consideration, Holdings was obligated to pay
an additional $1 million (the “Earn Out”) because Desktop achieved certain
revenue and gross margins, as defined, in the 90 day period subsequent to
closing the Desktop Merger. In addition, if Desktop achieved other certain
revenues, as defined, the Earn Out was subject to acceleration.
 
 Pursuant
to the terms of the Desktop Merger, on October 5, 2007, $643,000 was paid as
part of the Desktop earn-out and the purchase price and goodwill was adjusted
for purposes of applying purchase accounting under Statement of Financial
Accounting Standards (SFAS) No. 141, “Business Combinations”.
  Holdings
has accounted for the acquisition utilizing the purchase method of accounting in
accordance with SFAS 141. The results of operations of Desktop Interactive, Inc.
is included in the consolidated results of operations of the Company beginning
on September 1, 2007. The net purchase price, including acquisition costs paid,
was allocated to the fair value of assets acquired and liabilities assumed as
follows:
  Current
      assets (including cash of $82,260)
                          
                          $
                          1,802,751Property
      and equipment
                          
                          
                          63,197Other
      assets
                          
                          
                          35,873Goodwill
                          
                          
                          7,909,571Other
      intangibles
                          
                          
                          1,330,000Liabilities
      assumed
                          
                          
                          (1,882,593
                          )Deferred
      tax liability
                          
                          
                          (556,000
                          )Net
      purchase price
                          
                          $
                          8,702,799
  Prior to
its acquisition, the Company’s strategic evaluation of Desktop centered on
Desktop’s publisher relationships and its achievable reach, otherwise referred
to as scale. Reach is defined in terms of the percentage of the domestic online
population that can be reached through advertisements served by Desktop. At
December 31, 2007, as indicated by ComScore, the industry standard on which
an ad network’s reach in terms of advertising impressions delivered is measured,
Desktop ranked eleventh nationally with a 47% reach. This level of reach/scale
is critical to Desktop’s ability to attract, retain and increase its advertising
customer base and was the basis for recognizing $7,909,571, in goodwill as of
December 31, 2007.
  Intangible
assets acquired include Customer Relationships valued at
$540,000, Developed Technology valued at $790,000, and a domain name at
$683, which is included in other assets in the above
allocation.
  Goodwill
is expected not to be deductible for income tax purposes.
  F-9
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Unaudited
pro forma results of operations data as if the Desktop Merger had occurred as of
January 1, 2007 are as follows:
 
 Holdings
      and
                      DesktopFor
      the year endedDecember
      31, 2007Pro
      forma revenues
                    
                    $
                    11,896,788Pro
      forma (loss) income from operations
                    
                    $
                    (3,671,555
                    )Pro
      forma net loss
                    
                    $
                    (3,133,555
                    )Pro
      forma loss per share
                    
                    $
                    (.012
                    )Pro
      forma diluted loss per share
                    
                    $
                    (.012
                    )
 
 After the
CAN Merger, Holdings succeeded to the business of CAN as its sole line of
business. Desktop owned and operated an Internet advertising network serving
Internet advertising to website publishers including proprietary ad serving
technology operated under the name “Interclick.” After the Desktop Merger, we
also continued to operate the Desktop business.
 
 Unless
the context requires otherwise, references to the "Company," "CAN," "we," "our"
and "us" for periods prior to the closing of our reverse merger on August 28,
2007, refer to Customer Acquisition Network, Inc., a private Delaware
corporation that is now our wholly-owned subsidiary, and references to the
"Company," “Holdings”, “interCLICK”, "we," "our" and "us" for periods subsequent
to the closing of the reverse merger on August 28, 2007, refer to interCLICK,
Inc. (formerly Customer Acquisition Network Holdings, Inc.), a publicly traded
company, and its subsidiaries, Customer Acquisition Network, Inc., Desktop
Interactive, Inc. and Options Acquisition Sub, Inc. (which ceased being a
consolidated subsidiary on June 23, 2008 and was treated as discontinued
operations thereafter).
  The
Company was previously presented as a development stage company. Upon its
acquisition of Desktop on August 31, 2007, the Company exited the development
stage.
  Merger
with Options Media
 
 On
January 4, 2008, Holdings consummated an Agreement and Plan of Merger (the
“Options Merger”), wherein Holdings formed, Options Acquisition Sub, Inc.
(“Options Acquisition”), and Options Newsletter, Inc. (“Options Newsletter” or
"Options") was merged with and into Options Acquisition, which was the surviving
corporation and a wholly-owned subsidiary of Holdings.  On June 23,
2008, Options Acquisition was sold to Options Media Group Holdings,
Inc.
  Options
Newsletter, a privately-held Delaware corporation, now known as Options
Media, began selling advertising space within free electronic newsletters
that Options Newsletter published and emailed to subscribers. Options Newsletter
also generated leads for customers by emailing its customers’ advertisements to
various email addresses from within the Options Newsletter database. Options
Newsletter 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 1.0 million shares of Holdings’ stock valued at $5.72 per share (applying
EITF 99-12 “Determination of the Measurement Date for the Market Price of
Acquirer Securities Issued in a Purchase Business Combination”). The total
initial purchase price was $7,395,362 and included cash of $1,500,000, 1,000,000
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 10,000 warrants
valued at $29,169 with an exercise price of $5.57 per share.
 
 The
shares of Holdings’ stock issued in conjunction with the Options Merger are
subject to a 12-month lockup.
  F-10
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 In
addition to the initial merger consideration, Holdings was obligated to pay 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. 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 has
increased the purchase price and been included as an adjustment to goodwill in
the purchase price allocation below.
 
 Holdings
has accounted for the acquisition utilizing the purchase method of accounting in
accordance with Statement of Financial Accounting Standards (SFAS) No. 141,
“Business Combinations”. 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.
 
 Unaudited
pro forma results of operations data as if the Desktop Merger and Options Merger
had occurred as of January 1, 2007 are as follows:
  Holdings
      and
                      Desktop
                    
                    
                    Options
      Media
                    
                    
                    HoldingsFor
      the year ended
                      December
      31, 2007
                    
                    
                    For
      the year ended
                      December
      31, 2007
                    
                    
                    For
      the year ended
                      December
      31, 2007Pro
      forma revenues
                    
                    $
                    11,896,788
                    
                    
                    $
                    1,819,060
                    
                    
                    $
                    13,715,848Pro
      forma (loss) income from operations
                    
                    $
                    (3,671,555
                    )
                    
                    $
                    353,323
                    
                    
                    $
                    (3,318,232
                    )Pro
      forma net loss
                    
                    $
                    (3,133,555
                    )
                    
                    $
                    (36,677
                    )
                    
                    $
                    (3,170,232
                    )Pro
      forma loss per share
                    
                    $
                    (0.12
                    )
                    
                    $
                    (0.001
                    )
                    
                    $
                    (0.013
                    )Pro
      forma diluted loss per share
                    
                    $
                    (0.12
                    )
                    
                    $
                    (0.001
                    )
                    
                    $
                    (0.013
                    )
 
 In
connection with the purchase of Options, the Company executed a three-year
employment agreement with the former owner of Options to pay him $250,000 per
year plus 300,000 options which cliff vest 1/3 at the end of each of three years
and are exercisable at $1.00 per share.  On September 30, 2008, the
Company entered into a settlement agreement with the seller whereby all 300,000
stock options became fully vested immediately and exercisable as follows:
100,000 stock options shall be exercisable as of January 15, 2009 and 200,000
stock options shall be 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.
  Divestiture
of Options Media
 
 On June
23, 2008, Holdings, 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.
  F-11
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 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 common
stock (the “OPMG Stock”), (ii) $3,000,000 in cash and (iii) a $1,000,000 senior
secured promissory note receivable from OPMG (the “Note”).  The OPMG
Stock was 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 bears interest of 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 satisfied
in full its obligations under the $1,000,000 senior secured promissory note
issued to the Company in connection with the Options Divestiture.  As
a result, the Company received $1,006,164, which includes accrued
interest.
 
 The loss
from the Options Divestiture is included in loss on sale of discontinued
operations and is calculated as follows:
 
 Consideration
      received for sale:Cash
      consideration
                    
                    $
                    3,000,000Note
      receivable
                    
                    
                    1,000,00012.5
      million 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.
 
 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 Note”), among the Company, CAN, Desktop
(the “Subsidiaries”) and Longview Marquis Master Fund, L.P., (“Longview”). The
remaining balance of the Longview Note as of June 23, 2008 (giving effect to the
increase in principal described under the “Amendment Agreement” below) was
$1,773,573. The Company also pledged the OPMG Stock to Longview, in order to
secure the remaining balance of the Longview Note (See Note 8).
 
 On
September 30, 2008, the Company entered into a settlement agreement with the
former owner of Options Media to settle all amounts due under the $1 million
Earn-Out and the January 4, 2008 employment agreement whereby the Company agreed
to pay $600,000 upon execution of the settlement agreement and $500,000, payable
in two equal installments on October 30, 2008 and January 15,
2009.  The $1,100,000 in payments has been discounted to a net present
value of $1,090,230 using a discount rate of 12%.  In addition, all
stock options previously granted to the former owner of Options Media became
fully vested immediately.  As 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.
  F-12
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Note 2. Going
Concern
  As
reflected in the accompanying consolidated financial statements for the year
ended December 31, 2008, the Company had a net loss of $12,025,539 and
$3,029,210 of net cash used in operations. At December 31, 2008, the Company had
a working capital deficiency of $1,438,181, which includes $400,000 of senior
secured notes payable maturing June 30, 2009. Additionally at December 31, 2008,
the Company had an accumulated deficit of $15,258,506. These matters and the
Company’s expected needs for capital investments required to support operational
growth and maturing debt raise substantial doubt about its ability to continue
as a going concern. The Company’s consolidated financial statements do not
include any adjustments to reflect the possible effects on recoverability and
classification of assets or the amounts and classification of liabilities that
may result from its inability to continue as a going concern.
 
 Since
inception, the Company has financed its working capital and capital expenditure
requirements primarily from the issuance of short term debt securities and sales
of common stock as well as sales of online advertising services.  In
addition, the Company is pursuing the refinancing of its maturing debt and/or
extending the maturity of such debt beyond June 30, 2009.
 
 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, which would represent gross factored
accounts receivable less a 20% reserve holdback by Crestmark.  The
Crestmark credit facility has an interest rate equal to prime plus 1.0% (overall
interest rate of 4.25% at December 31, 2008) and is secured by all of the
Company’s assets except property and equipment financed elsewhere and the
Company’s investment in OPMG shares, which have been pledged to secure the GRQ
Notes (See Note 8).  In addition, the Company pays 0.575% per 30 days
on each invoice amount until the invoice is paid.  The Crestmark
credit facility is for an initial term of six months 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, 2008 was $2,550,720, which is net of
the 20% reserve of $637,705 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, 2008 was $949,280.  In February 2009, the
Crestmark credit facility was increased to a maximum credit line of $4.5 million
and in March 2009, the expiration date of the Crestmark credit facility was
extended by one year to May 12, 2010 (See Note 15).
 
 While we
have heavily invested in the operations and proprietary technology platform of
our online advertising network and will continue to invest in our online
advertising network, we believe that based on our current cash and working
capital position, our current and projected operations and our assessment of how
potential equity and/or debt investors have viewed, and will continue to view
us, and the expected growth in our business, we will be able to obtain the
required capital and cash flows from operations to execute our business plan
successfully and continue operations through December 31, 2009, however, there
can be no assurances.
 
 Our
business plan is based on our ability to generate future revenues from the sale
of advertising as well as the obtaining of adequate capital to support our
growth and operating activities. However, the time required for us to become
profitable from operations is uncertain, and we cannot assure investors that we
will achieve or sustain operating profitability or generate sufficient cash flow
and obtain the necessary capital to meet our planned capital expenditures,
working capital and debt service requirements.
 
 We
believe that actions being taken by management as discussed above provide the
opportunity to allow us to continue as a going concern.
 
 Note
3. 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 on property and equipment, valuation and amortization
periods of intangible assets and deferred costs, valuation of goodwill,
valuation of discounts on debt, valuation of capital stock, options and warrants
granted for services or recorded as debt discounts, or other non-cash purposes
including business combinations, the estimate of the valuation allowance on
deferred tax assets and estimates of the tax effects of business combinations
and sale of subsidiary, and estimates in equity investee’s
losses.
  F-13
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Principals
of Consolidation
  The
consolidated financial statements include the accounts of interCLICK, Inc.
(formerly Customer Acquisition Network Holdings, Inc.) and its wholly-owned
subsidiary and prior subsidiary through its sale date. All significant
inter-company balances and transactions have been eliminated in the
consolidation.  As a result of the Options Divestiture, the results of
Options Acquisition are reported as “Discontinued Operations”.
 
 Business
Combinations
  The
Company accounts for its acquisitions utilizing the purchase method of
accounting. Under the purchase method of accounting, the total consideration
paid is 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 is 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.
 
 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, 2008.
 
 Accounts
Receivable and Allowance for Doubtful Accounts Receivable
  Trade
accounts receivables are stated at gross invoice amounts less an allowance for
doubtful accounts receivable.
 
 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 evaluates
other circumstances that indicate that the Company should abandon such
efforts.
 
 Advertising
 
 The
Company conducts advertising for the promotion of its products and
services.  In accordance with SOP 93-7, advertising costs are charged
to operations when incurred; such amounts aggregated $107,163 in 2008 and $9,470
in 2007.
  F-14
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 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
      yearsSoftware
                
                3
      yearsFurniture
      and fixtures
                
                3-5
      yearsOffice
      equipment
                
                3-5
      yearsCapitalized
      leases
                
                5
      years
 
 Intangible
Assets
  The
Company records the purchase of intangible assets not purchased in a
business combination in accordance with SFAS 142 “Goodwill and Other Intangible
Assets” and records intangible assets acquired in a business combination in
accordance with SFAS 141 “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 an 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
  The
Company tests goodwill for impairment in accordance with the provisions of
Statement of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and
Other Intangible Assets”. 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. The Company has determined its
reporting units based on the guidance in SFAS No. 142 and Emerging Issues
Task Force (“EITF”) Issue D-101, “Clarification of Reporting Unit Guidance
in Paragraph 30 of FASB Statement No. 142.” As of December 31, 2008, the
Company’s reporting units consisted of interCLICK and Desktop. The Company has
elected to test for goodwill impairment annually.  We completed our
annual goodwill impairment test as of December 31, 2008 and determined that
no adjustment to the carrying value of goodwill was required.
 
 Investment
in Available-For-Sale Marketable Securities
 
 The
Company invests in various marketable equity instruments and accounts for such
investments in accordance with SFAS 115. Trading securities that the Company may
hold are treated in accordance with SFAS 115 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 APB No. 18, "The Equity
Method of Accounting for Investments in Common Stock" ("APB
18").  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.
  F-15
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 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 APB No. 18.
 
 Management
determines the appropriate classification of its investments at the time of
acquisition and reevaluates such determination at each 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 SFAS No. 144, “Accounting for
the Impairment or Disposal of Long-lived Assets,” 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 Staff Accounting Bulletin (“SAB”)
No. 104, “Revenue Recognition in Financial Statements.”  Under SAB
No. 104, 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.
  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 EITF Issue No. 99-19, “Reporting Revenue Gross as a Principal
versus Net as an Agent,” the Company recognizes revenue as a principal.
Accordingly, revenue is recognized on a gross basis.
 
 Cost
of Revenue
  Cost of
revenue consists of publisher fees. The Company becomes obligated to make
payments related to the above fees 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 of Financial Instruments
  The
Company’s financial instruments, including cash and cash equivalents, accounts
receivable, notes payable, accounts payable and accrued expenses, are carried at
historical cost basis, which approximates their fair values because of the
short-term nature of these instruments.
  F-16
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Fair
Value
 
 On
January 1, 2008, the Company adopted the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 157, “Fair Value
Measurements” (“SFAS 157”). SFAS 157 defines fair value as used in numerous
accounting pronouncements, establishes a framework for measuring fair value and
expands disclosure of fair value measurements. In February 2008, the
Financial Accounting Standards Board (“FASB”) issued FASB Staff Position, “FSP
FAS 157-2—Effective Date of FASB Statement No. 157” (“FSP 157-2”), which
delays the effective date of SFAS 157 for one year for certain nonfinancial
assets and nonfinancial liabilities, except those that are recognized or
disclosed at fair value in the financial statements on a recurring basis (at
least annually). Excluded from the scope of SFAS 157 are certain leasing
transactions accounted for under SFAS No. 13, “Accounting for Leases.” The
exclusion does not apply to fair value measurements of assets and liabilities
recorded as a result of a lease transaction but measured pursuant to other
pronouncements within the scope of SFAS 157.
 
 Income
Taxes
  The
Company uses the asset and liability method of accounting for income taxes in
accordance with SFAS No. 109, “Accounting for 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 is included as a component of income tax expense and income
taxes payable.
  In June
2006, the FASB issued SFASB Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes — an interpretation of FASB Statement No. 109” (“FIN
48”).  This statement which clarifies the accounting for uncertainty
in income taxes recognized in an enterprise’s financial statements in accordance
with SFAS No. 109, “Accounting for Income Taxes.” FIN 48 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. FIN 48, which is effective for fiscal years beginning after December
15, 2006, also 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, 2008, the tax year 2007 remains 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 FIN 48
on our inception date of June 14, 2007. The adoption of the provisions of FIN 48
did not have a material impact on our financial position and results of
operations.
 
 Effective
June 14, 2007 (Inception), the Company adopted FASB Staff Position FIN 48-1,
Definition of Settlement in FASB Interpretation No. 48, (“FSP FIN 48-1”), which
was issued on May 2, 2007. FSP FIN 48-1 amends FIN 48 to provide 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 FIN 48. FSP FIN 48-1 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. The adoption of FSP FIN 48-1 did not
have an impact on the accompanying consolidated financial
statements.
 
 Stock-Based
Compensation
 
 Compensation
expense associated with the granting of stock based awards to employees and
directors and non-employees is recognized in accordance with SFAS No.
123(R), “Share Based Payment” and related interpretations. SFAS No. 123(R)
requires companies to estimate and recognize the fair value of stock-based
awards to employees and directors. The value of the portion of an award that is
ultimately expected to vest is recognized as an expense over the requisite
service periods using the straight-line attribution method.
  F-17
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Basic
and Diluted Net Loss Per Common Share
  Basic net
loss per common share is computed by dividing net loss by the weighted average
number of shares of common stock outstanding for the period. Diluted net loss
per common share is computed using the weighted average number of common shares
outstanding for the period, and, if dilutive, potential common shares
outstanding during the period. Potential common shares consist of the
incremental common shares issuable upon the exercise of stock options, stock
warrants, convertible debt instruments or other common stock
equivalents.
 
 Reclassifications
 
 Certain
amounts in the accompanying 2007 financial statements have been reclassified to
conform to the 2008 presentation.
 
 Comprehensive
Loss
 
 Comprehensive
loss includes net 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 through
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 Statement of Financial Accounting Standards No. 144 “Accounting for the
Impairment or Disposal of Long-Lived Assets”.  In addition, certain
allocable corporate expenses pertaining to Options Acquisition are also included
in discontinued operations.
 
 Recently
Issued Accounting Standards
 
 In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”). SFAS 141R requires that upon initially
obtaining control, an acquirer will recognize 100% of the fair values of
acquired assets, including goodwill, and assumed liabilities, with only limited
exceptions, even if the acquirer has not acquired 100% of its target.
Additionally, contingent consideration arrangements will be fair valued at the
acquisition date and included on that basis in the purchase price consideration
and transaction costs will be expensed as incurred. SFAS 141R also modifies the
recognition for pre-acquisition contingencies, such as environmental or legal
issues, restructuring plans and acquired research and development value in
purchase accounting. SFAS 141R amends SFAS No. 109, “Accounting for Income
Taxes,” to require the acquirer to recognize changes in the amount of its
deferred tax benefits that are recognizable because of a business combination
either in income from continuing operations in the period of the combination or
directly in contributed capital, depending on the circumstances. SFAS 141R
is effective for business combinations for which the acquisition date is on or
after January 1, 2009. The impact of adopting SFAS 141R will be
dependent on the future business combinations that the Company may pursue after
its effective date.
 
 On
January 1, 2008, the Company adopted the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities — Including an amendment of FASB
Statement No. 115.”  SFAS No. 159 permits all entities to choose to
measure and report many financial instruments and certain other items at fair
value at specified election dates.  If such an election is made, any
unrealized gains and losses on items for which the fair value option has been
elected are required to be reported in earnings at each subsequent reporting
date.  In addition, SFAS No. 159 establishes presentation and
disclosure requirements designed to facilitate comparisons between companies
that choose different measurement attributes for similar types of assets and
liabilities.  The Company does not believe that the adoption of SFAS
No. 159 will have a material effect on the Company’s financial position or
results of operations and cash flows.
 
 In
December 2007, the FASB issued SFAS No. 160, “Non-controlling
Interests in Consolidated Financial Statements” (“SFAS 160”). This Statement
amends Accounting Research Bulletin No. 51, “Consolidated Financial
Statements,” to establish accounting and reporting standards for the
non-controlling interest in a subsidiary and for the deconsolidation of a
subsidiary. SFAS 160 is required to be adopted simultaneously with SFAS 141R and
is effective for the Company on January 1, 2009. The Company does not
currently have any non-controlling interests in its subsidiaries, and
accordingly, the adoption of SFAS 160 is not expected to have a material impact
on its consolidated financial position, cash flows or results of
operations.
  F-18
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS 161”).  SFAS 161 requires enhanced
disclosures about an entity’s derivative and hedging activities and thereby
improves the transparency of financial reporting.  It is intended to
enhance the current disclosure framework in SFAS 133 by requiring that
objectives for using derivative instruments be disclosed in terms of underlying
risk and accounting designation.  This disclosure better conveys the
purpose of derivative use in terms of the risks that the entity is intending to
manage.  The new disclosure standard is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged.  The Statement
encourages, but does not require, comparative disclosures for earlier periods at
initial adoption.  We have not yet determined the effect on our
financial statements, if any, upon the adoption of SFAS 161, however, as of
December 31, 2008, the Company was not involved in any derivative or hedging
activities.
 
 In June
2008, the Emerging Issues Task Force of the FASB issued EITF Issue No. 07-5,
Determining Whether an Instrument (or Embedded Feature) Is Indexed to an
Entity’s Own Stock (“EITF 07-5”), which is effective for fiscal years ending
after December 15, 2008, with earlier application not permitted by entities that
has previously adopted an alternative accounting policy.  The adoption of
EITF 07-5’s requirements will affect accounting for convertible instruments and
warrants with provisions that protect holders from declines in the stock price
(“round-down” provisions).  Warrants with such provisions will no longer be
recorded in equity.  EITF 07-5 guidance is to be applied to outstanding
instruments as of the beginning of the fiscal year in which the Issue is
applied.  The cumulative effect of the change in accounting principle shall
be recognized as an adjustment to the opening balance of retained earnings (or
other appropriate components of equity) for that fiscal year, presented
separately.  The cumulative-effect adjustment is the difference between the
amounts recognized in the statement of financial position before initial
application of this Issue and the amounts recognized in the statement of
financial position at initial application of this Issue.  The amounts
recognized in the statement of financial position as a result of the initial
application of this Issue shall be determined based on the amounts that would
have been recognized if the guidance in this Issue had been applied from the
issuance date of the instrument.  The Company is in the process of
determining the financial reporting (non-cash) effect of initial adoption of
this accounting requirement for future financial statements, and does not expect
adoption to have a material effect on its financial position, results of
operations or cash flows.
 
 Note
4. Accounts Receivable
 
 Accounts
receivable consisted of the following at December 31, 2008 and
2007:
 
 December
      31,
                        
                        
                        December
      31,2008
                        
                        
                        2007Accounts
      receivable
                        
                        $
                        7,545,311
                        
                        
                        $
                        3,540,302Less:
      Allowance for doubtful accounts
                        
                        
                        (425,000
                        )
                        
                        
                        (150,000
                        )Accounts
      receivable, net
                        
                        $
                        7,120,311
                        
                        
                        $
                        3,390,302
 
 As of
December 31, 2008 and 2007, we recorded an allowance for doubtful accounts of
$425,000 and $150,000, which represents an allowance percentage of 5.6% and 4.2%
of our gross accounts receivable balance of $7,545,311 and $3,540,302,
respectively.
 
 Bad debt
expense was $414,737 and $116,055 for the year ended December 31, 2008 and for
the period from June 14, 2007 (Inception) to December 31, 2007,
respectively.  During 2007, a portion of the allowance for doubtful
accounts was allocated to identifiable assets acquired related to the August 31,
2007 Desktop Acquisition.
 
 See also
Note 13 for concentrations of accounts receivable.
 
 Note
5. Property and Equipment
 
 Property
and equipment consisted of the following at December 31, 2008 and
2007:
  F-19
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 December
      31,
                          
                          
                          December
      31,2008
                          
                          
                          2007Computer
      equipment
                          
                          $
                          725,158
                          
                          
                          $
                          449,953Software
                          
                          
                          56,375
                          
                          
                          
                          3,273Furniture
      and fixtures
                          
                          
                          46,069
                          
                          
                          
                          66,872Capitalized
      leases
                          
                          
                          29,358
                          
                          
                          
                          29,358Office
      equipment
                          
                          
                          22,443
                          
                          
                          
                          7,471879,403
                          
                          
                          
                          556,927Accumulated
      amortization
                          
                          
                          (282,490
                          )
                          
                          
                          (44,896
                          )Property
      and equipment, net
                          
                          $
                          596,913
                          
                          
                          $
                          512,031
 
 Depreciation
expense for the year ended December 31, 2008 and for the period from June 14,
2007 (Inception) to December 31, 2007 was $245,489 and $44,896,
respectively.
 
 Note
6. Intangible Assets
 
 Intangible
assets, which were all acquired from the Desktop business combination, consisted
of the following at December 31, 2008 and 2007:
 
 December
      31,
                      
                      
                      December
      31,2008
                      
                      
                      2007Customer
      relationships
                      
                      $
                      540,000
                      
                      
                      $
                      540,000Developed
      technology
                      
                      
                      790,000
                      
                      
                      
                      790,000Domain
      name
                      
                      
                      683
                      
                      
                      
                      6831,330,683
                      
                      
                      
                      1,330,683Accumulated
      amortization
                      
                      
                      (720,570
                      )
                      
                      
                      (302,062
                      )Intangible
      assets, net
                      
                      $
                      610,113
                      
                      
                      $
                      1,028,621
 
 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 an accelerated amortization in which
the majority of costs is amortized during the two-year period following the
acquisition date of the intangible.  Accumulated amortization was
$509,220 at December 31, 2008.
 
 Developed
technology is being amortized on a straight-line basis over five
years.  Accumulated amortization was $210,667 at December 31,
2008.
 
 The
domain name was amortized over its estimated useful life of six months from its
acquisition in September 2007 and is fully amortized at December 31,
2008.
 
 The
following is a schedule of estimated future amortization expense of intangible
assets as of December 31, 2008:
 
 Year
      Ending December 31,2009
                    
                    $
                    188,7802010
                    
                    
                    158,0002010
                    
                    
                    158,0002011
                    
                    
                    105,333Total
                    
                    $
                    610,113
  F-20
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Amortization
expense for the year ended December 31, 2008 and for the period from June 14,
2007 (Inception) to December 31, 2007 was $418,508 and $305,482,
respectively.
 
 Note
7.  Investments
 
 The
following represents information about available-for sales securities held at
December 31, 2008:
 
 Securities  in
      loss positions
                    
                    
                    
                    
                    Aggregate
                    
                    
                    Aggregateless
      than 12 months
                    
                    Cost
                    
                    
                    Unrealized
      losses
                    
                    
                    Fair
      ValueOptions
      Media Group Holdings, Inc.
                    
                    $
                    1,847,704
                    
                    
                    $
                    197,704
                    
                    
                    $
                    1,650,000
 
 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 common stock (the “OPMG Stock”).  The OPMG Stock was
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 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.
 
 The OPMG
closing stock price on September 30, 2008 was $1.80 per share, however, due to
the thinly traded nature of such shares coupled with the fact that the Company
owns restricted shares, the Company used the most recent cash sales price of
OPMG stock of $0.22 per share to value its remaining 7.7 million OPMG shares
resulting in a basis of $1,694,000 as of September 30, 2008.  As a
result of the valuation, the Company recorded in the third quarter of 2008 a
$197,704 unrealized loss on available-for-sale equity securities in the
stockholders’ section of the consolidated financial statements.  On
December 2, 2008, the Company gave 200,000 OPMG shares having a basis of $44,000
to a consultant for services rendered valued at $44,000, resulting in no gain or
loss.  The carrying value as of December 31, 2008 was $1,650,000,
which is based on 7,500,000 shares held at $0.22 per share (the price at which
the Company last sold some of its OPMG shares in a private
transaction).  This investment is classified as available-for-sale
equity securities in the accompanying consolidated financial statements at
December 31, 2008.  The OPMG Stock has been pledged as security for
the 6% Senior secured promissory notes payable – related party (See Note
8).
 
 Because
the OPMG shares held by the Company are not registered, and therefore restricted
as to sale under federal securities laws, and the Company holds a large quantity
of shares compared to the public float of OPMG, the Company has determined that
liquidation within one year is not likely.  Accordingly, the OPMG
investment is included as a non-current asset in the accompanying consolidated
balance sheet.
 
 Note
8. Senior Secured Notes Payable, Factor Agreement and Other
Obligations
 
 Senior
Secured Notes Payable
 
 Senior
Secured Notes Payable consisted of the following at December 31, 2008 and
2007:
 
 December
      31,20086%
      Senior secured promissory notes payable - related party (due June 30,
      2009)
                    
                    $
                    400,000Less:
      Current maturities
                    
                    
                    (400,000
                    )Amount
      due after one year
                    
                    $
                    -
  F-21
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 December
      31, 2007Debt
      DiscountOriginal
                    
                    
                    
                    
                    
                    
                    
                    
                    Accumulated
                    
                    
                    Notes
      PayableIssue
                    
                    
                    Lender
                    
                    
                    Common
                    
                    
                    Amortization
      of
                    
                    
                    net
      ofPrincipal
                    
                    
                    Discount
                    
                    
                    Fee
                    
                    
                    Stock
                    
                    
                    Debt
      Discount
                    
                    
                    Debt
      Discount8%
      Senior secured promissory notes payable (due May 30, 2008)
                    
                    $
                    5,000,000
                    
                    
                    $
                    (500,000
                    )
                    
                    $
                    (50,000
                    )
                    
                    $
                    (802,500
                    )
                    
                    $
                    225,416
                    
                    
                    $
                    3,872,916Less:
      Current maturities
                    
                    
                    (5,000,000
                    )
                    
                    
                    500,000
                    
                    
                    
                    50,000
                    
                    
                    
                    802,500
                    
                    
                    
                    (225,416
                    )
                    
                    
                    (3,872,916
                    )Amount
      due after one year
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
                    
                    
                    $
                    -
 
 On
November 30, 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 contains 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 150,000 shares of common stock
at $0.01 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 $5.35. The purchase of the 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 has been
allocated to the value of the common stock sold to the lender as if such common
stock was 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 150,000 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.  Amortization of the debt discount for the
period from June 14, 2007 (Inception) to December 31, 2007 was $225,416, all of
which is included in interest expense.
 
 On May 5,
2008, $611,111 of the $5,000,000 Longview Notes and was paid by the issuance of
305,500 shares of common stock and 152,750 five-year warrants exercisable at
$2.50 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 are 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.  Amortization of the deferred
costs for the period from June 14, 2007 (Inception) to December 31, 2007 was
$13,932, all of which is included in interest expense.
 
 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.
  F-22
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 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 stock 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 bear 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 Stock 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.
 
 Accrued
interest related to above notes at December 31, 2008 and 2007 was $16,948 and
$33,333, 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 have been pledged to secure the GRQ Notes.  Due to the recourse
provision, the factoring arrangement is 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.
 
 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, which would represent gross factored
accounts receivable less a 20% reserve holdback by Crestmark.  The
Crestmark credit facility replaced the Silicon credit facility.  The
Crestmark credit facility has an interest rate equal to prime plus 1.0% (overall
interest rate of 4.25% at December 31, 2008) and is secured by all of the
Company’s assets except property and equipment financed elsewhere and the
Company’s investment in OPMG shares, which have been pledged to secure the GRQ
Notes.  In addition, the Company pays 0.575% per 30 days on each
invoice amount until the invoice is paid.  The Crestmark credit
facility is for an initial term of six months 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, 2008 was $2,550,720, which is net of the 20% reserve of
$637,705 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,
2008 was $949,280.  In February 2009, the Crestmark credit facility
was increased to a maximum credit line of $4.5 million and in March 2009, the
expiration date of the Crestmark credit facility was extended by one year to May
12, 2010 (See Note 15).
 
 The
following is a summary of accounts receivable factored as well as factor fees
incurred for the year ended December 31, 2008:
  F-23
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Silicon
                    
                    
                    Crestmark
                    
                    
                    TotalsTotal
      accounts receivable factored in 2008
                    
                    $
                    2,497,013
                    
                    
                    $
                    4,643,160
                    
                    
                    $
                    7,140,173Factored
      accounts receivable transferred from Silicon
                    
                    
                    -
                    
                    
                    
                    (1,906,686
                    )
                    
                    
                    (1,906,686
                    )Accounts
      receivable factored in 2008
                    
                    $
                    2,497,013
                    
                    
                    $
                    2,736,474
                    
                    
                    $
                    5,233,487Factoring
      fees incurred in 2008
                    
                    $
                    50,000
                    
                    
                    $
                    45,296
                    
                    
                    $
                    95,296
 
 The
factoring fees for Silicon include a $20,000 early termination fee.
 
 Convertible
Promissory Notes
  In June
2007, the Company’s then two majority shareholders advanced $250,000 to the
Company in the form of convertible notes at $125,000 each, bearing interest at
8% per annum mandatorily convertible at $.50 or 500,000 shares upon the Company
entering into a financing arrangement of over $2,000,000. The Company determined
that in accordance with SFAS 133, the embedded conversion options were not
derivatives at the debt issuance date of June 28, 2007 or the balance sheet date
of July 31, 2007, because the Company was not publicly traded prior to the
August 28, 2007 merger and therefore, the underlying shares were not easily
convertible to cash. In addition, there was no intrinsic beneficial conversion
value of the conversion rights. On August 28, 2007, the shareholders converted
the principal and interest of $250,000 into 500,000 shares (See Note
11.)
 
 Furniture
and Fixtures – Capital lease obligation
 
 In
December 2007, the Company purchased furniture and fixtures for $29,358 through
a financing agreement, payable in 36 installments of $882.  Interest
is calculated at 5.57% per annum.  Capital lease obligations consisted
of the following at December 31, 2008 and 2007:
 
 December
      31,
                    
                    
                    December
      31,2008
                    
                    
                    2007Capital
      lease obligations
                    
                    $
                    20,110
                    
                    
                    $
                    28,607Less:
      Current maturities
                    
                    
                    (10,615
                    )
                    
                    
                    (9,290
                    )Amount
      due after one year
                    
                    $
                    9,495
                    
                    
                    $
                    19,317
 
 Note
9. Net Loss per Share
 
 Basic
earnings per share are computed using the weighted average number of common
shares outstanding during the period. Diluted earnings per share are computed
using the weighted average number of common and potentially dilutive securities
outstanding during the period. Potentially dilutive securities consist of the
incremental common shares issuable upon exercise of stock options and warrants
(using the treasury stock method). Potentially dilutive securities are excluded
from the computation if their effect is anti-dilutive. The treasury stock effect
of options and warrants to shares of common stock outstanding at December 31,
2008 and 2007 have not been included in the calculation of the net loss per
share as such effect would have been anti-dilutive. As a result, the basic and
diluted loss per share amounts are identical for all periods
presented.
 
 At
December 31, 2008, there were common stock options for 5,075,954 shares and
common stock warrants for 1,402,050 shares, which if exercised, may dilute
future earnings per share.
 
 At
December 31, 2007, there were common stock options for 4,331,000 shares and
common stock warrants for 500,000 shares, which if exercised, may dilute future
earnings per share.
  Note
10. Income Taxes
 
 The
Company files a consolidated U.S. income tax return that includes its
U.S. subsidiaries. The amounts provided for income taxes are as
follows:
  F-24
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 For
      the periodFor
      the
                    
                    
                    from
      June 14, 2007Year
      Ended
                    
                    
                    (Inception)
      toDecember
      31, 2008
                    
                    
                    December
      31, 2007Current
      (benefit) provision: federal
                    
                    $
                    (1,310,732
                    )
                    
                    $
                    -Current
      (benefit) provision: state
                    
                    
                    (376,573
                    )
                    
                    
                    18,000Total
      current provision
                    
                    
                    (1,687,305
                    )
                    
                    
                    18,000Deferred
      (benefit) provision: federal
                    
                    
                    -
                    
                    
                    
                    (486,500
                    )Deferred
      (benefit) provision: state
                    
                    
                    -
                    
                    
                    
                    (69,500
                    )Total
      deferred provision
                    
                    
                    -
                    
                    
                    
                    (556,000
                    )Total
      provision (benefit) for income taxes from continuing
      operations
                    
                    $
                    (1,687,305
                    )
                    
                    $
                    (538,000
                    )
 
 Significant
items making up the deferred tax assets and deferred tax liabilities as of
December 31, 2008 and 2007 are as follows:
 
 December
      31, 2008
                      
                      
                      December
      31, 2007Current
      deferred taxes:Accounts
      receivable
                      
                      $
                      170,000
                      
                      
                      $
                      46,422Amortization
      of warrants
                      
                      
                      107,088
                      
                      
                      
                      35,696Total
      current deferred tax assets
                      
                      
                      277,088
                      
                      
                      
                      82,118Long-term
      deferred taxes:Depreciation
                      
                      
                      86,737
                      
                      
                      
                      -Organizational
      costs
                      
                      
                      67,739
                      
                      
                      
                      -Deferred
      compensation-stock options
                      
                      
                      1,186,581
                      
                      
                      
                      108,370Deferred
      rent
                      
                      
                      29,078
                      
                      
                      
                      -Acquired
      intangible assets-amortization
                      
                      
                      (268,046
                      )
                      
                      
                      (435,358
                      )Investment
      in OPMG
                      
                      
                      160,918
                      
                      
                      
                      -Net
      operating loss carryforward
                      
                      
                      1,353,235
                      
                      
                      
                      1,197,256Total
      long-term deferred tax assets, net
                      
                      
                      2,616,242
                      
                      
                      
                      870,268Total
      deferred taxes
                      
                      
                      2,893,330
                      
                      
                      
                      952,386Less:
      valuation allowance
                      
                      
                      (2,893,330
                      )
                      
                      
                      (952,386
                      )Total
      net deferred tax assets
                      
                      $
                      -
                      
                      
                      $
                      -
 
 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 and 2007 for the full amount of our
deferred tax assets due to the uncertainty of realization.  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 not be
able to realize the benefit of the deferred tax asset at December 31,
2008.  The valuation allowance as of December 31, 2008 was
$2,893,331.  The net change in the valuation allowance during the year
ended December 31, 2008 was an increase of $1,940,945.
 
 At
December 31, 2008, the Company had $3,383,088 of net operating loss
carryforwards which will expire from 2027 to 2028.
 
 The
Company’s effective income tax (benefit) rate for continuing operations differs
from the statutory federal income tax rate of 34% as follows:
  F-25
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 For
      the periodFor
      the
                    
                    
                    from
      June 14, 2007Year
      Ended
                    
                    
                    (Inception)
      toDecember
      31, 2008
                    
                    
                    December
      31, 2007Federal
      tax rate applied to earnings (loss) before income taxes
                    
                    
                    34.0
                    %
                    
                    
                    34.0
                    %Permanent
      differences
                    
                    
                    1.0
                    %
                    
                    
                    0.0
                    %State
      income taxes
                    
                    
                    6.0
                    %
                    
                    
                    5.0
                    %Change
      in valuation allowance
                    
                    
                    -22.0
                    %
                    
                    
                    -25.0
                    %Income
      tax expense (benefit)
                    
                    
                    19.0
                    %
                    
                    
                    14.0
                    %
 
 As part
of the allocation of purchase price associated with the Desktop Merger (see Note
1) deferred tax liabilities of $556,000 were established as a result of
differences between the book and tax basis of acquired intangible assets. In
addition, as of December 31, 2007 the company has a net deferred tax asset of
$435,358 recognized as of result of $3,770,967 consolidated net loss before
income taxes and other temporary difference presented above for the period
from June 14, 2007 (inception) to December 31, 2007. The deferred tax asset is
net of a $952,386 valuation allowance. The deferred tax asset is netted against
the deferred tax liability for a net zero amount and accordingly neither is
presented on the accompanying consolidated balance sheet.
 
 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.
  Note
11. Stockholders’ Equity
  Preferred
Stock
 
 The
Company is authorized to issue up to 10,000,000 shares of $0.001 par value
preferred stock of which none is issued and outstanding at December 31, 2008 and
2007.
  Common
Stock
 
 The
Company is authorized to issue up to 140,000,000 shares of $0.001 par value
common stock of which 37,845,167 and 34,979,667 shares were issued and
outstanding at December 31, 2008 and 2007, respectively.
  At
inception, the Company issued 14,000,000 shares of common stock to two founders
for a subscription receivable of $14,000 or $0.001 per share. The subscription
payment was received in August 2007.
  On June
28, 2007, the Company issued 2,600,000 shares of common stock to three officers
pursuant to their employment agreements. A subscription receivable of $2,600 or
$0.001 per share was recorded as of July 31, 2007. The subscription payment was
received in August 2007.
 
 During
July and August 2007, the Company issued 7,138,000 shares of common stock for
proceeds of $6,998,547, net of offering costs of $139,453.
 
 On August
28, 2007, the Company is deemed to have issued 6,575,000 shares of common stock
pursuant to a recapitalization (See Note 1).
 
 On August
28, 2007, the Company issued 500,000 shares of common stock upon conversion of
$250,000 mandatory redeemable convertible debt.
  On August
31, 2007, the Company issued 3,500,000 shares of common stock in consideration
for the purchase of Desktop (See Note 1).
  F-26
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 On
October 12, 2007, the Company agreed to issue 66,667 shares of common stock in
settlement of $100,000 outstanding legal fees. The shares were valued at $1.00
per share resulting in a gain of $33,333 which was credited to legal expenses
and netted in general and administrative expenses in the accompanying statement
of operations.
 
 On
October 22, 2007, a consultant exercised 600,000 warrants for $6,000 (See
below).
 
 On
January 4, 2008, the Company issued 1,000,000 shares of its common stock valued
at $5,717,273, and 10,000 five-year warrants valued at $29,169 with an exercise
price of $5.57 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) 300,000 shares of its common stock and (ii) five-year
warrants to purchase 150,000 shares of its common stock at an exercise price of
$2.75 per share for gross proceeds of $750,000 ($2.50 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 warrants, the shares
and warrants are price protected and the Company is obligated to issue
additional shares and/or warrants in the event the Company issues common stock
at a price less than $2.50 per share.
 
 During
the period from April 30, 2008 through July 17, 2008, the Company sold to
various investors (i) 1,125,000 shares of its common stock and (ii) five-year
warrants to purchase 562,500 shares of its common stock at an exercise price of
$2.50 per share for gross proceeds of $2,250,000 ($2.00 per unit), of which
$62,500 and five-year warrants to purchase 11,800 shares of its common stock at
an exercise price of $2.50 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 warrants, the shares and warrants are price protected and the Company
is obligated to issue additional shares and/or warrants in the event the Company
issues common stock at a price less than $2.00 per share.
 
 On April
30, 2008, as a result of the issuance by the Company of common stock at a price
below $2.50 per share and warrants at an exercise price below $2.75 per share,
the Company issued an additional 75,000 shares of its common stock and five-year
warrants to purchase 15,000 shares of its common stock at an exercise price of
$2.50 per share, pursuant to price protection clauses contained within the
subscription agreements.  In addition, the five-year warrants to
purchase 150,000 shares of the Company’s common stock at an exercise price of
$2.75 per share were also repriced to $2.50 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 $75 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 305,500 shares of its common stock
and five-year warrants to purchase 152,750 shares of its common stock at an
exercise price of $2.50 per share having an aggregate value of $611,000, which
was based on a private placement price of $2.00 per unit for similar securities
occurring at the time of settlement.  Until the earlier of 18 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 warrants, the
shares and warrants are price protected and the Company is obligated to issue
additional shares and/or warrants in the event the Company issues common stock
at a price less than $2.50 per share. 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 60,000 shares of common stock having a fair value
of $189,000 (based on a quoted trading price of $3.15 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 and the period from June 14, 2007 (Inception)
to December 31, 2007, the Company amortized $178,481 and $683,241, respectively,
of deferred equity-based expense related to warrants.
 
 Consulting
Agreements and Warrants Granted
  On August
29, 2007, Holdings assumed CAN’s obligations pursuant to a consulting agreement
with a provider of investor and public relation services (the “Consulting
Agreement”). Under the terms of the Consulting Agreement, the service provider
was to provide described services under a 12-month term at fees of $7,000
monthly. In connection with the Holdings entering into the Consulting Agreement,
Holdings issued, on September 5, 2007, 500,000 warrants for Holdings stock at an
exercise price of $2.00 per share (the “Warrants”). The Warrants expire on
September 5, 2012 and it and the underlying warrant shares are subject to an
18-month lock-up. In addition, as of the date Holdings entered into the
Consulting Agreement, the Warrants issued under such Consulting Agreement were
fully vested and non-forfeitable. Accordingly, in accordance with Emerging
Issues Task Force 00-18, “Accounting Recognition for Certain Transactions
Involving Equity Instruments Granted to Other Than Employees” the fair market
value of the Warrants was $267,772. The Company estimated fair value using the
Black-Scholes option-pricing model, based on 80% volatility (based on comparable
companies) five year expected life of the Warrant and a risk free rate for
expected life of 4.16%. The $267,722 is being deferred and recognized pro rata
over the term of the agreement. Accordingly, the Company recorded compensation
expense of $178,481 and $89,241 for the year ended December 31, 2008 and for the
period from June 14, 2007 (Inception) to December 31, 2007, respectively, in
connection with the Warrants.
  F-27
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 On
October 12, 2007, the Company entered into an additional consulting agreement
with a provider of investor and public relation services (the “Second Consulting
Agreement”). Under the terms of the Second Consulting Agreement, the service
provider is to provide described services under an 18-month term at fees of
$12,000 monthly. In connection with the Company entering into the Second
Consulting Agreement, the Company issued, on October 12, 2007, 600,000
additional warrants for Holdings common stock at an exercise price of $0.01 per
share (the “Additional Warrants”). The Additional Warrants were to expire on
October 31, 2007. In addition, as of the date Holdings entered into the Second
Consulting Agreement, the Additional Warrants to be issued under such Second
Consulting Agreement are fully vested and non-forfeitable. Accordingly, in
accordance with Emerging Issues Task Force 00-18, “Accounting Recognition for
Certain transactions Involving Equity Instruments Granted to Other Than
Employees” the fair market value of the Additional Warrants, $594,000, was
deferred and to be recognized pro rata over the agreement term.  The
Company estimated the fair value using the Black Scholes option pricing model
based on 80% volatility (based on comparable volatilities), expected term of 30
days and an interest rate of 4.25%.  On October 22, 2007, the
consultant exercised the Additional Warrants and the Company received
$6,000.  On December 11, 2007, in mutual agreement with the Company, the
Second Consulting Agreement was terminated and the remaining portion of the
$594,000 of unamortized deferred consulting costs was expensed and included in
general and administrative expenses.
 
 A summary
of the Company’s stock warrant activity during the year ended December 31, 2008
is presented below:
 
 WeightedWeighted
                      
                      
                      AverageAverage
                      
                      
                      Remaining
                      
                      
                      AggregateNo.
      of
                      
                      
                      Exercise
                      
                      
                      Contractual
                      
                      
                      IntrinsicShares
                      
                      
                      Price
                      
                      
                      Term
                      
                      
                      ValueBalance
      Outstanding, 12/31/07
                      
                      
                      500,000
                      
                      
                      $
                      2.00Granted
                      
                      
                      902,050
                      
                      
                      
                      2.53Exercised
                      
                      
                      -Forfeited
                      
                      
                      -Expired
                      
                      
                      -Balance
      Outstanding, 12/31/08
                      
                      
                      1,402,050
                      
                      
                      $
                      2.34
                      
                      
                      
                      4.1
                      
                      
                      $
                      -Exercisable,
      12/31/08
                      
                      
                      1,402,050
                      
                      
                      $
                      2.34
                      
                      
                      
                      4.1
                      
                      
                      $
                      -
 
 Stock
Incentive Plan and Option Grants
 
 Pursuant
to the CAN Merger, Holdings’ Board of Directors approved the 2007 Stock
Incentive Plan (the “Plan”) that provides for the grant of up to 4,500,000
shares of common stock and/or options to purchase common stock to directors,
employees and consultants.
  Immediately
following the CAN Merger, on August 28, 2007 ( the “Measurement Date”), Holdings
granted to three officers, options to purchase shares of Holdings common stock
pursuant to their respective employment agreements. In connection with such
grants, Holdings’ Chief Executive Officer, Chief Operating Officer and Chief
Financial Officer each received options to purchase 1,350,000, 500,000, and
285,000 shares of our common stock, respectively. The term of the options
granted to Holdings’ senior executives under the Plan is five years expiring
August 28, 2012. The per share exercise price of the options is $1.00.
One-twelfth (1/12) of the options granted will vest and become exercisable each
quarter that the executive remains employed with us after giving effect to the
CAN Merger.
  F-28
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 In
addition to options granted to officers, on August 28, 2007 we granted 100,000
options to each of five directors, two of whom were also officers, pursuant to
the Plan. The term of the options granted to Holdings’ senior executives under
the Plan is five years expiring August 28, 2012. The per share exercise price of
the options is $1.00. With respect to the two employee directors, one-twelfth
(1/12) of the options granted will vest and become exercisable each quarter that
the executive remains employed with us after giving effect to the CAN Merger.
The options granted to the Company’s other directors vest 25% on each
anniversary of the date of grant except in the event that a non-employee
director is terminated for “Cause” in accordance with the Company’s by-laws,
options continue to vest as set forth above and are exercisable at any time
prior to the expiration date in the event that such director no longer serves on
our board.
  Immediately
following the Desktop Merger on August 31, 2007, Holdings, pursuant to the Plan,
granted the President of Desktop Interactive, options to purchase 300,000 shares
of Holdings’ common stock at an exercise price of $1.00 per share. The term of
these options is five years expiring August 31, 2012. One-quarter of the options
granted becomes exercisable each year the President remains employed with
Holdings, after giving effect to the Desktop Merger. The exercise price per
share of each option is $1.00.
  On
September 21, 2007, Holdings granted 465,000 common stock options at an exercise
price of $1.00 per share to certain employees of Desktop. Such options expire
September 21, 2012 and vest one quarter per year over four
years.
  On
October 12, 2007, Holdings granted 671,000 common stock options at an exercise
price of $1.00 per share to certain employees of Holdings. Such options expire
September 12, 2012 and 625,000 vest over three years and the remaining 46,000
options vest over four years.
  On
November 13, 2007, Holdings adopted the Customer Acquisition Network Holdings
Inc., 2007 Incentive Stock and Award Plan (the “2007 Award Plan”), that
provides for the grant of up to 1,000,000 shares of common stock and/or
options to purchase common stock to directors, employees and consultants and in
order to provide a means whereby employees, officers, directors and consultants
of Registrant and its affiliates and others performing services to Registrant
may be given an opportunity to purchase shares of the common stock of Registrant
(See Note 15).  The 2007 Award Plan shall be administered by a
committee consisting of two or more independent, non-employee and outside
directors (the “Committee”). In the absence of such a Committee, the Board of
Directors of Registrant shall administer the Plan.
  The
material terms of each option granted pursuant to the 2007 Award Plan by
Registrant shall contain the following terms: (i) that the purchase price of
each share of common stock 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 share
of common stock 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.
 
 During
November and December 2007, we granted 260,000 stock options at exercise prices
ranging from $1.00 to $6.00 pursuant to employment contracts. The options vest
pro rata over four years and expire five years from the grant date.
 
 On
September 23, 2008, 1,462,500 of the stock options issued during 2008 were
repriced 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 1,970,000 stock options,
each exercisable at the fair value of the common stock on the respective grant
dates ranging from $1.31 to $6.16 pursuant to employment contracts. The options
vest pro rata over two to four years and expire five years from the grant
date.
 
 As of
December 31, 2008, 124,046 shares were remaining under the 2007 Stock Incentive
Plan and 300,000 shares were remaining under the 2007 Incentive Stock and Award
Plan for future issuance.
 
 The
total fair value of stock options granted during the year ended December
31, 2008 and for the period from June 14, 2007 (Inception) to December 31, 2007
was $3,757,581 and $3,939,062, respectively, which is being recognized over the
respective vesting periods. The Company recorded compensation expense of
$2,695,528 and $270,926 for the year ended December 31, 2008 and for the period
from June 14, 2007 (Inception) to December 31, 2007, respectively, in connection
with these stock options.
  F-29
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 The
Company estimates the fair value of share-based compensation utilizing the
Black-Scholes option pricing model, which is dependent upon several variables
such as the expected option term, expected volatility of our stock price over
the expected term, expected risk-free interest rate over the expected option
term, expected dividend yield rate over the expected option term, and an
estimate of expected forfeiture rates. The Company believes this valuation
methodology is appropriate for estimating the fair value of stock options
granted to employees and directors which are subject to SFAS 123R
requirements.  These amounts are estimates and thus may not be
reflective of actual future results, nor amounts ultimately realized by
recipients of these grants.  The following table summarizes the
assumptions the Company utilized to record compensation expense for stock
options granted during the year ended December 31, 2008 and for the period from
June 14, 2007 (Inception) to December 31, 2007:
 
 For
      the periodFor
      the
                    
                    
                    from
      June 14, 2007Year
      Ended
                    
                    
                    (Inception)
      toAssumptions
                    
                    December
      31, 2008
                    
                    
                    December
      31, 2007Expected
      life (years)
                    
                    
                    5
                    
                    
                    
                    5Expected
      volatility
                    
                    
                    52.77%
      - 80
                    %
                    
                    
                    80
                    %Risk-free
      interest rate
                    
                    
                    2.66%
      - 4.78
                    %
                    
                    
                    4.25%
      - 4.42
                    %Dividend
      yield
                    
                    
                    0.00
                    %
                    
                    
                    0.00
                    %
 
 The
expected volatility for 2007 is based on comparative companies and for 2008 is
based earlier on comparable companies and later on historical volatility. The
expected term is based on the contractual term. The risk-free interest rate
is based on the U.S. Treasury yields with terms equivalent to the expected life
of the related option at the time of the grant.  Dividend yield is
based on historical trends.  While the Company believes these
estimates are reasonable, the compensation expense recorded would increase if
the expected life was increased, a lower expected volatility was used, or if the
expected dividend yield increased.
 
 A summary
of the Company’s stock option activity during the year ended December 31, 2008
is presented below:
 
 WeightedWeighted
                      
                      
                      AverageAverage
                      
                      
                      Remaining
                      
                      
                      AggregateNo.
      of
                      
                      
                      Exercise
                      
                      
                      Contractual
                      
                      
                      IntrinsicShares
                      
                      
                      Price
                      
                      
                      Term
                      
                      
                      ValueBalance
      Outstanding, 12/31/07
                      
                      
                      4,331,000
                      
                      
                      $
                      1.06Granted
                      
                      
                      1,970,000
                      
                      
                      
                      2.16Exercised
                      
                      
                      -Forfeited
                      
                      
                      (1,225,046
                      )
                      
                      
                      1.01Expired
                      
                      
                      -Balance
      Outstanding, 12/31/08
                      
                      
                      5,075,954
                      
                      
                      $
                      1.50
                      
                      
                      
                      4.0
                      
                      
                      $
                      -Exercisable,
      12/31/08
                      
                      
                      1,203,454
                      
                      
                      $
                      1.08
                      
                      
                      
                      3.7
                      
                      
                      $
                      -
 
 The
weighted-average grant-date fair value of options granted during the year ended
December 31, 2008 and the period from June 14, 2007 (Inception) to December 31,
2007 was $1.91 and $0.91, respectively.
 
 As of
December 31, 2008, there was $4,360,526 of total unrecognized compensation costs
related to nonvested share-based compensation arrangements.  That cost
is expected to be recognized over a weighted-average period of 1.3
years.
 
 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, 2008:
  F-30
  INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Year
      ending December 31,2009
                        
                        $
                        11,5372010
                        
                        
                        9,762Total
      minimum lease payments
                        
                        
                        21,299Less:
      Amount representing interest
                        
                        
                        (1,189
                        )Present
      value of net minimum lease payments
                        
                        $
                        20,110
 
 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, 2008:
 
 Year
      ending December 31,2009
                      
                      $
                      472,7892010
                      
                      
                      487,9712011
                      
                      
                      472,9702012
                      
                      
                      421,3792013
                      
                      
                      378,034Later
      years
                      
                      
                      349,284$
                      2,582,427
 
 Rent
expense for the year ended December 31, 2008 and for the period from June 14,
2007 (Inception) to December 31, 2007 was $347,560 and $90,764,
respectively.
 
 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.
 
 The
Company leased office space for its New York, NY 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.  As the Company is still obligated
under the original New York lease, the Company is attempting to sublease this
office space.
 
 In
October 2008, the Company leased office space in San Francisco, CA under a
month-to-month lease agreement bearing monthly rent of $3,371.  In
December 2008, the Company leased office space in Chicago, Illinois under a
6-month lease agreement bearing monthly rent of $1,400 commencing January 1,
2009.
 
 Severance
Package
 
 On April
25, 2008, Bruce Kreindel,  the Company’s former Chief Financial
Officer (the “CFO”), Treasurer, and formerly a 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 member of the board
of directors of the Company. 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 the
employment agreement dated June 28, 2007 between Mr. Kreindel and the Company,
Mr. Kreindel received equity in the Company known as “Founder’s Stock.” Pursuant
to the terms of the Separation Agreement, Mr. Kreindel will retain his Founder’s
Stock. Prior to entering into the Separation Agreement, 115,954 options had
vested as of the date of the Separation Agreement. Pursuant to the Separation
Agreement, Mr. Kreindel will not be entitled to any other options. Mr. Kreindel
has the right to exercise any of the vested options for a period of 12 months
after the separation date.
  F-31
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 Guaranteed
Bonus
  In
December 2007, the Company entered into an employment agreement 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 has paid the entire $500,000 of the guaranteed bonus and no additional
amounts are due.
 
 Settlement
with Former Owner of Options Newsletter
 
 As part
of the Options Merger, the Company became obligated to pay up to an additional
$1 million (the “Earn-Out”) if certain gross revenues are achieved for the one
year period subsequent to the Options Merger payable 60 days after the end of
each of the quarters starting with March 31, 2008.  On September 30,
2008, the Company entered into a settlement agreement with the former owner of
Options Media to settle all amounts due under the $1 million Earn-Out and the
January 4, 2008 employment agreement whereby the Company agreed to pay $600,000
upon execution of the settlement agreement and $500,000, payable in two equal
installments on October 30, 2008 and January 15, 2009.  The $1,100,000
in payments has been discounted to a net present value of $1,090,230 using a
discount rate of 12%.  In addition, all stock options previously
granted to the former owner of Options Media became fully vested
immediately.  As 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.
 
 Agreement
with Falcon
 
 On May
28, 2008, the Company entered into a six-month Consulting Services Agreement
(the “Agreement”) whereby the Company is to receive investor and marketing
relations in exchange for: (i) issuing 60,000 shares of its common stock within
10 days of the Agreement having a fair value of $189,000, (ii) issuing 60,000
shares of its 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 60,000 shares of common stock due to the
consultant on August 28, 2008 were not issued.  No further
consideration is due under the Agreement.
  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, 2008, 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 that he is therefore 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.
 
 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 two financial institutions in
the United States. The balance, at any given time, may exceed Federal Deposit
Insurance Corporation (“FDIC”) insurance limits of $250,000 per institution. As
of December 31, 2008, there was $90,458 in excess of insurable
limits.  As of December 31, 2007, there was approximately
$1,136,000 and $2,806,000 in excess of insurable limits at two different
locations.
  Concentration
of Revenues and Accounts Receivable
 
 For the
year ended December 31, 2008 and the period from June 14, 2007 (Inception) to
December 31, 2007, the Company had significant customers with individual
percentage of total revenues equaling 10% or greater as follows:
  F-32
  INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 For
      the periodFor
      the
                          
                          
                          from
      June 14, 2007Year
      Ended
                          
                          
                          (Inception)
      toDecember
      31, 2008
                          
                          
                          December
      31, 2007Customer
      1
                          
                          
                          10.2
                          %
                          
                          
                          0.0
                          %Customer
      2
                          
                          
                          0.0
                          %
                          
                          
                          34.3
                          %Customer
      3
                          
                          
                          0.0
                          %
                          
                          
                          32.9
                          %Totals
                          
                          
                          10.2
                          %
                          
                          
                          67.2
                          %
 
 At
December 31, 2008 and 2007, concentration of accounts receivable with
significant customers representing 10% or greater of accounts receivable was as
follows:
 
 December
      31,
                        
                        
                        December
      31,2008
                        
                        
                        2007Customer
      1
                        
                        
                        20.8
                        %
                        
                        
                        0.0
                        %Customer
      2
                        
                        
                        0.0
                        %
                        
                        
                        39.8
                        %Customer
      3
                        
                        
                        0.0
                        %
                        
                        
                        25.4
                        %Customer
      4
                        
                        
                        0.0
                        %
                        
                        
                        11.0
                        %Totals
                        
                        
                        20.8
                        %
                        
                        
                        76.2
                        %
 
 Note
14. Related Party Transactions
 
 In 2007,
the Company’s two then majority shareholders advanced $250,000 to the Company in
the form of convertible notes at $125,000 each, bearing interest at 8% per
annum, mandatorily convertible at $.50 or 500,000 shares upon the Company
entering into a financing arrangement of over $2,000,000. On August 28, 2007,
the shareholders converted the principal of $250,000 into 500,000 shares (See
Note 11.)
 
 In
connection with the acquisition of Desktop in 2007, Holdings was obligated to
pay an additional $1 million (the “Earn-Out”) if Desktop achieves certain
revenue and gross margins, as defined, in the 90 day period subsequent to
closing the Desktop Merger. In addition, if Desktop achieves other certain
revenues, as defined, the Earn-Out was subject to acceleration. Pursuant to the
terms of the Desktop Merger, $643,000 of the Earn-Out was paid on October 5,
2007 and the remaining $357,000 of the Earn-Out was paid on September 30,
2008.
 
 In
connection with the sale of the Longview Notes in 2007, a related party
issued 150,000 shares of common stock to the lender for a value of
$802,500 (See Note 8).
 
 Included
in revenues for the year ended December 31, 2008 and for the period from June
14, 2007 (Inception) to December 31, 2007 is approximately $43,000 and $154,000,
respectively, of revenue from a related party affiliate which is controlled by
one of our executive officers and directors who was one of the former owners of
Desktop Interactive, Inc., the Company we acquired on August 31,
2007.
 
 On
September 26, 2008, we sold senior secured promissory notes (the “GRQ
Notes”) in the original aggregate principal amount of $1,300,000 to one of our
Co-Chairman, of which $900,000 had been repaid as of December 31, 2008 (See
Note 8).
 
 Note
15. Subsequent Events
 
 On
February 3, 2009, the Company’s revolving credit facility with Crestmark
Commercial Capital Lending, LLC (“Crestmark”) to finance up to 80% of the
Company’s accounts receivable was increased to a maximum credit line of $4.5
million.
 
 On March
3, 2009, the term of the Company’s revolving credit facility with Crestmark
Commercial Capital Lending, LLC (“Crestmark”) to finance up to 80% of the
Company’s accounts receivable was extended to May 12, 2010.
  F-33
 
 INTERCLICK,
INC. (FORMERLY CUSTOMER ACQUISITION NETWORK HOLDINGS, INC.) AND
SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER
31, 2008 AND 2007
 
 On
February 6, 2009, the Company increased the number of shares of common stock
eligible for grant under the 2007 Incentive Stock and Award Plan from 1,000,000
to 1,225,000 common shares.  In addition, the 2007 Equity Incentive
Plan shall be deemed fully used with 4,500,000 shares reserved and any remaining
shares available for grant, including the new 225,000 shares, shall be under the
2007 Incentive Stock and Award Plan.
 
 On
February 6, 2009, the Company granted 620,000 stock options at an exercise price
of $0.76 having an aggregate fair value of $384,400 all of which expire five
years from the grant date. Of the options granted, (i) 220,000 were issued to
officers and vested immediately and (ii) 400,000 were issued to an employee and
vest in equal increments over a four-year period each June 30 and December
31 commencing June 30, 2009, subject to continued employment by the
Company.
 
 On
February 27, 2009, the Company granted 56,250 shares of restricted common
stock having a fair value of $56,250 (based on a quoted trading price of $1.00
per share) to an officer.  The shares were issued under the 2007
Incentive Stock and Award Plan and vest in equal increments over
a four-year period each June 30 and December 31 commencing June 30, 2009,
subject to continued employment by the Company.
  F-34