UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

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

Commission File Number 001-16249

INTERNET CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware		23-2996071
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
690 Lee Road, Suite 310, Wayne, PA		19087
(Address of principal executive offices)		(Zip Code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer o		Accelerated filer þ		Non-accelerated filer o		Smaller reporting company o

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

The number of shares of the Company’s Common Stock, $0.001 par value per share, outstanding as of November 2, 2009 was 36,732,607 shares.

 

 

INTERNET CAPITAL GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q

INDEX

ITEM		PAGE NO.
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets—September 30, 2009 (unaudited) and December 31, 2008			6
Consolidated Statements of Operations (unaudited)—Three and Nine Months Ended September 30, 2009 and 2008			7
Consolidated Statements of Cash Flows (unaudited)—Nine Months Ended September 30, 2009 and 2008			8
Notes to Consolidated Financial Statements			9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			29
Item 3. Quantitative and Qualitative Disclosures About Market Risk			39
Item 4. Controls and Procedures			40
PART II — OTHER INFORMATION
Item 1. Legal Proceedings			41
Item 1A. Risk Factors			42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43
Item 3. Defaults Upon Senior Securities			43
Item 4. Submission of Matters to a Vote of Security Holders			43
Item 5. Other Information			43
Item 6. Exhibits			44
Signatures			45
EX-31.1
EX-31.2
EX-32.1
EX-32.2

Although we refer in this Quarterly Report on Form 10-Q (this “Report”) to companies in which we have acquired a convertible debt or an equity ownership interest as our “partner companies” and indicate that we have a “partnership” with these companies, we do not act as an agent or legal representative for any of our partner companies, we do not have the power or authority to legally bind any of our partner companies, and we do not have the types of liabilities in relation to our partner companies that a general partner of a partnership would have.

Our Internet website address is www.internetcapital.com. Unless this Report explicitly states otherwise, neither the information on our website, nor the information on the website of any of our partner companies, is incorporated by reference into this Report.

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed by us with the U.S Securities and Exchange Commission (the “SEC”) pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are accessible free of charge through our website as soon as reasonably practicable after we electronically file those documents with, or otherwise furnish them to, the SEC.

The public may read and copy any of the reports that are filed with the SEC at the SEC’s Public Reference Room at 450 Fifth Street, NW, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Forward-Looking Statements

Forward-looking statements made with respect to our financial condition and results of operations and business in this Report and those made from time to time by us through our senior management are made pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations and projections about future events but are subject to known and unknown risks, uncertainties and assumptions about us and our partner companies that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements.

Factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those anticipated in forward-looking statements include, but are not limited to:

•

economic conditions generally;

•

capital spending by enterprises and customers;

•

our partner companies’ collective ability to compete successfully against their respective competitors;

•

rapid technological developments in the respective markets in which our partner companies operate and our partner companies’ collective ability to respond to such changes in a timely and effective manner;

•

our ability to deploy capital effectively and on acceptable terms;

•

our ability to maximize value in connection with divestitures;

•

our ability to retain key personnel; and

•

our ability to manage existing capital resources effectively.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue” or the negative of such terms or other similar expressions. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Report might not occur. For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2008, as well as other reports and registration statements filed by us with the SEC.

Our Partner Companies

The results of operations of our partner companies are reported within two segments: the “core” reporting segment and the “other holdings” reporting segment. The core reporting segment includes those partner companies in which ICG’s management takes a very active role in providing strategic direction and management assistance. We devote significant expertise and capital to maximizing the success of those core partner companies. The other holdings reporting segment includes partner companies over which, in general, we have less influence because they are public companies and/or we have a relatively small ownership stake in those partner companies.

At September 30, 2009, our core partner companies consisted of:

Channel Intelligence, Inc. (“Channel Intelligence”)

Channel Intelligence is a data solutions company that provides innovative suites of services for manufacturers, retailers and publishers that help consumers work with retailers to find and buy products, whether they start at retailer sites, manufacturer sites or destination shopping sites, through the use of Channel Intelligence’s patented optimization technology and data solutions.

Freeborders, Inc. (“Freeborders”)

Freeborders is a provider of technology solutions and outsourcing from China. Freeborders provides industry expertise to North American and European companies in financial services, technology, retail/consumer goods, manufacturing and transportation and logistics. Freeborders’ offerings help companies seeking cost-effective technology solutions.

ICG Commerce Holdings, Inc. (“ICG Commerce”)

ICG Commerce is a procurement services provider delivering total procurement cost savings through a combination of deep expertise and hosted technology. ICG Commerce provides a comprehensive range of solutions to help companies identify savings through sourcing, realize savings through implementation of purchase-to-pay automation and drive continuous improvements through ongoing category management.

Investor Force Holdings, Inc. (“Investor Force”)

Investor Force is a financial software company specializing in the development of online applications for the financial services industry. Investor Force provides pension consultants and other financial intermediaries with a Web-based enterprise platform that integrates data management with robust analytic and reporting capabilities in support of their institutional and other clients. Investor Force’s applications provide investment consultants with the ability to conduct real-time analysis and research into client, manager and market movement and to produce timely, automated client reports.

Metastorm Inc. (“Metastorm”)

Metastorm is an enterprise software and service provider that enables its customers to turn business strategies into business processes by fully integrating the work that people do with software systems that optimize business performance. Metastorm delivers a complete set of scalable business process management solutions that leverage existing information technology investments to unite people, processes and technology in a service-based architecture.

StarCite, Inc. (“StarCite”)

StarCite provides a comprehensive suite of software applications and services to the meeting and events industry. StarCite helps drive efficiencies and cost savings to both corporate buyers and suppliers. Corporate, association and third-party meeting buyers rely on StarCite’s enterprise meeting solutions for workflow, procurement, supply chain management, spend analysis and attendee management. Thousands of industry suppliers rely on the StarCite online marketplace, supplier marketing programs and enabling technologies to increase meeting revenues. StarCite’s international division represents destination management companies and other premier international travel suppliers.

WhiteFence, Inc. (“WhiteFence”)

WhiteFence is a Web services provider used by household consumers to compare and purchase essential home services, such as electricity, natural gas, telephone and cable/satellite television. WhiteFence reaches customers directly through company-owned websites and through its network of exclusive channel partners that integrate the Web services applications into their own business processes and websites.

At September 30, 2009, our other holdings partner companies consisted of:

Acquirgy, Inc. (“Acquirgy”)

Acquirgy specializes in Search Engine Marketing (SEM) and Direct Response Television (DRTV) services and provides comprehensive account service, as well as creative and production expertise with integrated multichannel software platforms. SEM services include outsourced paid search management, SEM Performance Consulting (SEMpc^TM) for clients managing search internally and search engine optimization. DRTV services include comprehensive script-to-screen DRTV creative, production and media services.

Anthem Ventures Fund, L.P. (“Anthem”)

Anthem provides resources to enhance the development of emerging technology companies by providing financial investment, operational and management advice, as well as access to a network of professional relationships.

Captive Capital Corporation (“Captive Capital”)

Captive Capital creates and manages turn-key, multi-lender financing under its customers’ brand names. Through funding relationships with lenders and syndication capabilities for large transactions, Captive Capital serves manufacturers and distributors throughout the United States and Canada.

ClickEquations, Inc. (f/k/a Commerce360, Inc.) (“ClickEquations”)

ClickEquations is a software-based search marketing company that improves paid and organic search campaign performance for its clients, which include Internet Retailer 500 and Fortune 100 companies. Its proprietary technology uses advanced mathematics and statistical analysis to optimize campaigns across the entire search chain and deliver improved campaign efficiency and performance.

GoIndustry DoveBid plc (“GoIndustry”) (LSE.AIM:GOI)

GoIndustry is a leader in auction sales and valuations of used industrial machinery and equipment. GoIndustry combines traditional asset sales experience with innovative e-commerce technology and advanced direct marketing to service the needs of multi-national corporations, insolvency practitioners, dealers and asset based lenders around the world.

Jamcracker, Inc. (“Jamcracker”)

The Jamcracker Services Delivery Network enables global on-demand service delivery by bringing together on-demand services vendors, solution providers and resellers to foster channel development, delivery and on-demand market growth.

Tibersoft Corporation (“Tibersoft”)

Tibersoft strengthens the trading relationships in the foodservice industry by using an integrated blend of services and technology.

PART I — FINANCIAL INFORMATION

ITEM 1.		Financial Statements

CONSOLIDATED BALANCE SHEETS

		September 30,				December 31,
		2009				2008
		(Unaudited)
		(in thousands,
		except per share data)
Assets
Current Assets
Cash and cash equivalents		$	77,228			$	89,295
Restricted cash			240				232
Accounts receivable, net of allowance ($385-2009; $721-2008)			13,193				14,526
Broker receivable			5,653				—
Prepaid expenses and other current assets			2,597				3,068
Total current assets			98,911				107,121
Marketable securities			67,515				57,367
Hedges of marketable securities			601				6,551
Fixed assets, net			2,489				1,783
Ownership interests in partner companies			85,510				83,751
Goodwill			16,944				26,658
Other assets, net			1,100				2,349
Total Assets		$	273,070			$	285,580
Liabilities
Current Liabilities
Current maturities of long-term debt		$	70			$	318
Accounts payable			1,176				2,026
Accrued expenses			4,238				4,461
Accrued compensation and benefits			9,518				10,385
Deferred revenue			4,200				6,646
Total current liabilities			19,202				23,836
Long-term debt			83				3,916
Deferred revenue			—				1,910
Other			483				1,092
Total Liabilities		$	19,768			$	30,754
Equity
Internet Capital Group, Inc.’s Stockholders’ Equity
Preferred Stock, $0.01 par value; 10,000 shares authorized, none issued or outstanding			—				—
Common Stock, $0.001 par value; 2,000,000 shares authorized, 38,766 (2009) and 38,703 (2008) issued			39				39
Treasury Stock, at cost, 2,040 (2009) and 1,948 (2008) shares			(9,699	)			(9,329	)
Additional paid-in capital			3,576,125				3,573,146
Accumulated deficit			(3,387,132	)			(3,370,649	)
Accumulated other comprehensive income			64,960				54,302
Total Internet Capital Group, Inc.’s Stockholders’ Equity			244,293				247,509
Noncontrolling Interest			9,009				7,317
Total Equity			253,302				254,826
Total Liabilities and Equity		$	273,070			$	285,580

See accompanying notes to Consolidated Financial Statements.

INTERNET CAPITAL GROUP, INC.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(in thousands, except per share data)
Revenues		$	22,572			$	17,104			$	66,301			$	50,707
Operating expenses
Cost of revenue			14,402				11,580				42,205				34,526
Selling, general and administrative			8,347				8,336				26,721				26,828
Research and development			2,178				3,219				7,418				7,455
Impairment related and other			1,295				197				5,269				389
Total operating expenses			26,222				23,332				81,613				69,198
			(3,650	)			(6,228	)			(15,312	)			(18,491	)
Other income (loss), net			10,226				34,368				11,225				39,856
Interest income			98				317				338				1,550
Interest expense			(49	)			(129	)			(206	)			(206	)
Income (loss) before income taxes, equity loss and noncontrolling interest			6,625				28,328				(3,955	)			22,709
Income tax (expense) benefit			(516	)			224				(884	)			(69	)
Equity loss			(2,761	)			(6,020	)			(10,638	)			(17,842	)
Net income (loss)			3,348				22,532				(15,477	)			4,798
Less: Net income attributable to the noncontrolling interest			277				34				1,006				1,148
Net income (loss) attributable to Internet Capital Group, Inc.		$	3,071			$	22,498			$	(16,483	)		$	3,650
Basic income (loss) per share:
Net income (loss) attributable to Internet Capital Group, Inc.		$	0.08			$	0.59			$	(0.45	)		$	0.10
Shares used in computation of basic income (loss) per share			36,676				38,437				36,673				38,410
Diluted income (loss) per share:
Net income (loss) attributable to Internet Capital Group, Inc.		$	0.08			$	0.58			$	(0.45	)		$	0.09
Shares used in computation of diluted income (loss) per share			36,740				38,784				36,673				38,880

See accompanying notes to Consolidated Financial Statements.

INTERNET CAPITAL GROUP, INC.

		Nine Months Ended
		September 30,
		2009				2008
		(in thousands)
Operating Activities
Net income (loss)		$	(16,483	)		$	3,650
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization			1,354				1,182
Impairment related and other			4,991				150
Equity-based compensation			3,325				5,539
Equity loss			10,638				17,842
Other (income) loss			(11,225	)			(39,856	)
Noncontrolling interest			1,006				1,148
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net			89				(1,839	)
Prepaid expenses and other assets			(677	)			(1,037	)
Accounts payable			(44	)			203
Accrued expenses			893				(47	)
Accrued compensation and benefits			(891	)			(1,826	)
Deferred revenue			(1,494	)			138
Other liabilities			(48	)			377
Cash flows provided by (used in) operating activities			(8,566	)			(14,376	)
Investing Activities
Capital expenditures, net			(1,969	)			(973	)
Advanced deposits for acquisition of fixed assets			(206	)			—
Change in restricted cash			(20	)			(14	)
Proceeds from sales of marketable securities			9,103				30,194
Proceeds from sales of partner company ownership interests			2,607				3,206
Acquisitions of ownership interests in partner companies			(12,746	)			(34,723	)
Increase in cash due to consolidation of partner company			—				2,553
Decrease in cash due to sale of subsidiary assets			(81	)			—
Cash flows provided by (used in) investing activities			(3,312	)			243
Financing Activities
Borrowings of long-term debt			—				1,500
Payments of long-term debt and capital lease obligations			(130	)			(605	)
Line of credit repayments			(115	)			(68	)
Purchase of treasury stock			(370	)			(239	)
Other financing activities, net			33				—
Cash flows provided by (used in) financing activities			(582	)			588
Net increase (decrease) in Cash and Cash Equivalents			(12,460	)			(13,545	)
Effect of exchange rates on cash			393				(226	)
Cash and Cash Equivalents at beginning of period			89,295				82,031
Cash and Cash Equivalents at the end of period		$	77,228			$	68,260

See accompanying notes to Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

Description of the Company

Internet Capital Group, Inc. (the “Company”) acquires and builds Internet software and services companies that improve the productivity and efficiency of their business customers. Founded in 1996, the Company devotes its expertise and capital to maximizing the success of these companies.

Although the Company refers to companies in which it has acquired a convertible debt or an equity ownership interest as its “partner companies” and indicates that it has a “partnership” with these companies, it does not act as an agent or legal representative for any of its partner companies, it does not have the power or authority to legally bind any of its partner companies and it does not have the types of liabilities in relation to its partner companies that a general partner of a partnership would have.

2. Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements are unaudited and, in the opinion of management, include all adjustments consisting only of normal and recurring adjustments necessary for a fair presentation of the results for these interim periods. These Consolidated Financial Statements should be read in connection with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008. Results of operations for the three- and nine-month periods ended September 30, 2009 are not necessarily indicative of the results of operations expected for the full year.

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. The Consolidated Financial Statements also include the following majority-owned subsidiaries for all or a portion of the periods indicated, each of which has been consolidated since the date the Company acquired majority voting control (collectively, the “Consolidated Subsidiaries”):

Three and Nine Months Ended September 30,
2009		2008
ICG Commerce		ICG Commerce
Investor Force		Investor Force
Vcommerce(1)		Vcommerce(1)

The Consolidated Balance Sheets include the following majority-owned subsidiaries at September 30, 2009 and December 31, 2008:

September 30, 2009		December 31, 2008
ICG Commerce		ICG Commerce
Investor Force		Investor Force
		Vcommerce(1)

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Significant Accounting Policies — (Continued)

Principles of Accounting for Ownership Interests in Partner Companies

Each of the various interests that the Company acquires in its partner companies is accounted for under one of three methods: the consolidation method, the equity method and the cost method. The applicable accounting method is generally determined based on the Company’s voting interest in a partner company.

Consolidation. Partner companies in which the Company directly or indirectly owns more than 50% of the outstanding voting securities, and for which other stockholders do not possess the right to affect significant management decisions, are accounted for under the consolidation method of accounting. Under this method, a partner company’s balance sheet and results of operations are reflected within the Company’s Consolidated Financial Statements, and all significant intercompany accounts and transactions are eliminated. Participation of other partner company stockholders in the net assets and in the earnings or losses of a consolidated partner company is reflected in the caption “Noncontrolling interest” in the Company’s Consolidated Balance Sheets and Statements of Operations. Noncontrolling interest adjusts the Company’s consolidated results of operations to reflect only the Company’s share of the earnings or losses of the consolidated partner company. The results of operations and cash flows of a consolidated partner company are included through the latest interim period in which the Company owned a greater than 50% direct or indirect voting interest for the entire interim period or otherwise exercised control over the partner company. Upon a reduction of the Company’s ownership interest to below 50% of the outstanding voting securities, the accounting method is adjusted to the equity or cost method of accounting, as appropriate, for subsequent periods.

Equity Method. Partner companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to a partner company depends on an evaluation of several factors, including, among others, representation on the partner company’s board of directors and ownership level, which is generally between a 20% and a 50% interest in the voting securities of the partner company, as well as voting rights associated with the Company’s holdings in common stock, preferred stock and other convertible instruments in the partner company. Under the equity method of accounting, a partner company’s accounts are not reflected within the Company’s Consolidated Balance Sheets and Statements of Operations. The Company’s share of the earnings or losses of the partner company, as well as any adjustments resulting from prior period finalizations of equity income/losses, are reflected in the caption “Equity loss” in the Consolidated Statements of Operations. For the three and nine months ended September 30, 2009, those prior period adjustments are not material. The carrying values of the Company’s equity method partner companies are reflected in “Ownership interests in partner companies” in the Company’s Consolidated Balance Sheets.

When the Company’s interest in an equity method partner company is reduced to zero, no further losses are recorded in the Company’s Consolidated Financial Statements, unless the Company has guaranteed obligations of the partner company or has committed to additional funding. When the partner company subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.

Cost Method. Partner companies not accounted for under the consolidation or the equity method of accounting are accounted for under the cost method of accounting. The Company’s share of the earnings or losses of cost method companies is not included in the Consolidated Balance Sheets or Consolidated Statements of Operations. However, cost method partner company impairment charges are recognized in the Consolidated Statements of Operations. If circumstances suggest that the value of the partner company has subsequently recovered, the recovery is not recorded.

When a cost method partner company qualifies for use of the equity method, the Company’s interest is adjusted retroactively for its share of the past results of its operations. Therefore, prior losses could significantly decrease the Company’s carrying value balance at that time.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Significant Accounting Policies — (Continued)

The Company records its ownership interest in equity securities of partner companies accounted for under the cost method at cost, unless these securities have readily determinable fair values based on quoted market prices, in which case these interests are valued at fair value and classified as marketable securities or some other classification in accordance with accounting guidance for ownership interests in debt and equity securities.

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. These estimates include evaluation of the Company’s holdings in its partner companies, holdings in marketable securities, asset impairment, revenue recognition, income taxes and commitments and contingencies. These estimates and assumptions are based on management’s best judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Volatile equity markets and reductions in information technology spending have combined to increase the uncertainty inherent in such estimates and assumptions. It is reasonably possible that the Company’s accounting estimates with respect to the useful life of intangible assets and the ultimate recoverability of ownership interests in partner companies and goodwill could change in the near term and that the effect of such changes on the Company’s financial statements could be material. The Company believes the recorded amount of ownership interests in partner companies and goodwill is not impaired at September 30, 2009.

Ownership Interests in Partner Companies, Goodwill and Intangibles, net

The Company is required to test goodwill for impairment annually, or more frequently as conditions warrant, and intangible assets when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company uses equity method accounting to evaluate its equity method ownership interests in partner companies and determine whether an other than temporary decline in the value of a partner company should be recognized.

The Company continually evaluates the carrying value of its ownership interests in each of its partner companies for possible impairment based on achievement of business plan objectives and milestones, the value of each ownership interest in the partner company relative to carrying value, the financial condition and prospects of the partner company, and other relevant factors. The business plan objectives and milestones the Company considers include, among others, those related to financial performance, such as achievement of planned financial results or completion of capital raising activities, and those that are not primarily financial in nature, such as obtaining key business partnerships or the hiring of key employees. Impairment charges are determined by comparing the estimated fair value of a partner company with its carrying value. Fair value is determined by using a combination of estimating the cash flows related to the asset, including estimated proceeds on disposition, and an analysis of market price multiples of companies engaged in lines of business similar to the company being evaluated.

The Company’s policy is to perform ongoing business reviews for all partner companies and goodwill impairment tests annually in the fourth quarter of each fiscal year, or more frequently if conditions warrant. The Company recorded total impairments of $23.2 million during the fourth quarter of fiscal year 2008. Of this amount, $8.3 million was related to the impairment of goodwill, and the remaining $14.9 million was a reduction to the Company’s basis in certain partner companies. During the three and nine months ended September 30, 2009, the Company recorded additional impairments of $1.1 million and $5.4 million, respectively. Of the amounts recorded during the nine months ended September 30, 2009, approximately $4.9 million was related to the impairment of goodwill associated with Vcommerce, and the remaining $0.5 million was an impairment charge recorded in the first quarter to the basis in GoIndustry. At September 30, 2009, the Company’s carrying value of its ownership interests in partner companies totaled $85.5 million, goodwill totaled $16.9 million and intangibles, net, which are included in “Other assets, net” on the Company’s Consolidated Balance Sheets, totaled $0.6 million. See Note 3, “Ownership Interests in Partner Companies and Goodwill” for additional information regarding our ownership interest in partner companies, goodwill and related impairment.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Significant Accounting Policies — (Continued)

Concentration of Customer Base and Credit Risk

For the three months ended September 30, 2009, two customers of ICG Commerce, The Hertz Corporation (“Hertz”) and Kimberly-Clark Corporation (“Kimberly-Clark”), represented approximately 14% and 13%, respectively, of ICG’s consolidated revenue. For the nine months ended September 30, 2009, those customers each represented approximately 14% of ICG’s consolidated revenue. For the three months ended September 30, 2008, each of those customers represented approximately 21% of ICG’s consolidated revenue. For the nine months ended September 30, 2008, Hertz and Kimberly-Clark represented approximately 18% and 19%, respectively, of ICG’s consolidated revenue. Accounts receivable from Hertz and Kimberly-Clark as of September 30, 2009 were $1.7 million and $1.2 million, respectively. Accounts receivable from Hertz and Kimberly-Clark as of December 31, 2008 were $2.9 million and $1.4 million, respectively. The accounts receivable balances as of September 30, 2009 for these customers include $0.3 million and $0.1 million, respectively, of unbilled accounts receivable. The accounts receivable balances as of December 31, 2008 for these customers include $1.2 million and $0.3 million, respectively, of unbilled accounts receivable.

Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) released the FASB Accounting Standards Codification (the “ASC”) on July 1, 2009 as the single source of authoritative nongovernmental GAAP, superseding existing FASB, American Institute of Certified Public Accountants (“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature. The ASC was effective for the Company beginning with the interim period ended September 30, 2009. The adoption of the ASC resulted in changes to all references to authoritative accounting literature throughout the Company’s consolidated financial statements to be consistent with the ASC.

In December 2007, the FASB issued revised guidance for the accounting for business combinations. The revised guidance, contained within ASC 805, “Business Combinations” (formerly FASB Statement of Financial Accounting Standards (“SFAS”) No. 141(R), “Business Combinations”), requires most identifiable assets, liabilities, noncontrolling interests and goodwill acquired in a business combination to be recorded at “full fair value.” At adoption on January 1, 2009, the Company’s consolidated financial statements were not impacted by this guidance, which will be applied by the Company to business combinations occurring on or after the adoption date.

In December 2007, the FASB issued accounting guidance contained within ASC 810, “Consolidation” (formerly SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an Amendment of ARB No. 51”), which requires noncontrolling interests (previously referred to as minority interests) to be reported as a component of equity and changes the accounting for transactions with noncontrolling interest holders. At adoption on January 1, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance, other than the presentation of noncontrolling interests in the Company’s consolidated financial statements. This guidance is being applied prospectively to all noncontrolling interests, including any that arose before the adoption date. See “Other Consolidated Company Information” in Note 3, “Ownership Interests in Partner Companies and Goodwill.”

In March 2008, the FASB issued new guidance on the disclosure of derivative instruments and hedging activities. This guidance, included in ASC 815, “Derivatives and Hedging” (formerly SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of SFAS No. 133, ‘Accounting for Derivatives and Hedging Activities’”), requires enhanced disclosures to enable financial statement users to better understand the effects of derivatives and hedging on an entity’s financial position, financial performance and cash flow. At adoption on January 1, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Significant Accounting Policies — (Continued)

In June 2008, the FASB ratified guidance contained in ASC 815, “Derivatives and Hedging” (formerly EITF No. 07-5, “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock”), which clarifies the determination of whether an instrument (or an embedded feature) is indexed to an entity’s own stock and would therefore qualify as a scope exception to derivative accounting. At adoption on January 1, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance.

In November 2008, the FASB ratified guidance included in ASC 323, “Investments — Equity Method and Joint Ventures” (formerly EITF No. 08-6, “Equity Method Investment Accounting Considerations”), which clarifies how to account for certain transactions involving equity method companies. Specifically, it addresses the initial measurement, decreases in value and changes in the level of ownership of equity method companies. At adoption on January 1, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance.

In April 2009, the FASB issued guidance included in ASC 825, “Financial Instruments” (formerly final staff position (“FSP”) SFAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”). This guidance requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. At adoption beginning with the interim period ended June 30, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance.

In April 2009, the FASB issued new guidance for the accounting of other-than-temporary impairments. This guidance, which is included in ASC 320, “Investments — Debt and Equity Securities” (formerly FSP SFAS 115-2 and SFAS 124-2, “Recognition and Presentation of Other Than Temporary Impairments”), is intended to bring greater consistency to the timing of impairment recognition and provide greater clarity to investors about the credit and noncredit components of impaired debt securities that are not expected to be sold. This guidance also requires increased and timelier disclosures regarding expected cash flows, credit losses, and an aging of securities with unrealized losses. At adoption beginning with the interim period ended June 30, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance.

In April 2009, the FASB issued additional guidance for fair value measurement, which is part of ASC 820, “Fair Value Measurements and Disclosures” (formerly FSP SFAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”), and provides guidance on how to determine the fair value of assets and liabilities when the volume and level of activity for the asset/liability has significantly decreased. This guidance also identifies circumstances that indicate a transaction is not orderly. In addition, this guidance requires disclosure in interim and annual periods of the inputs and valuation techniques used to measure fair value and a discussion of changes in valuation techniques. This guidance became effective for the Company beginning with the interim period ended June 30, 2009. At adoption beginning with the interim period ended June 30, 2009, the Company’s consolidated financial statements were not materially impacted by this guidance.

In May 2009, the FASB issued new guidance for accounting for subsequent events. This guidance, included in ASC 855, “Subsequent Events” (formerly SFAS No. 165, “Subsequent Events”), establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this guidance establishes that entities must evaluate subsequent events through the date the financial statements are issued, the circumstances under which a subsequent event should be recognized, and the circumstances for which a subsequent event should be disclosed. It also requires the Company to disclose the date through which subsequent events were evaluated. At adoption beginning with the interim period ended June 30, 2009, the Company’s consolidated financial statements were not impacted by this guidance. The Company evaluated subsequent events through November 9, 2009, the date the consolidated financial statements as of and for the period ended September 30, 2009 were issued.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Significant Accounting Policies — (Continued)

In June 2009, the FASB issued accounting guidance as SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” which has not yet been adopted into the ASC. The revised guidance requires former “qualifying special-purpose entities” to be evaluated for consolidation, changes the approach for determining a variable interest entity’s primary beneficiary and the frequency with which reassessments of this determination should be made, and requires additional disclosures related to these items. This guidance will become effective for the Company beginning on January 1, 2010. The Company is currently evaluating the impact this standard will have on its consolidated financial statements.

3. Ownership Interests in Partner Companies and Goodwill

The following table summarizes the Company’s ownership interests in partner companies:

		September 30,				December 31,
		2009				2008
		(in thousands)
Ownership interests in partner companies — Equity Method		$	85,010			$	83,751
Ownership interests in partner companies — Cost Method			500				—
		$	85,510			$	83,751

During the nine months ended September 30, 2008, ClickEquations, which was previously accounted for under the cost method, became an equity method company due to the Company’s increase in ownership through its participation in a financing round. Periods prior to 2008 have not been restated to reflect prior equity losses from the Company’s original acquisition of an interest in ClickEquations, since that interest was immaterial to the Company.

The following table summarizes the Company’s goodwill in partner companies:

		(in thousands)
Goodwill at December 31, 2008		$	26,658
Impairment of Vcommerce (during the three months ended June 30, 2009)			(3,750	)
Decrease due to sale of Vcommerce assets on August 28, 2009			(4,838	)
Impairment of Vcommerce (during the three months ended September 30, 2009)			(1,126	)
Goodwill at September 30, 2009		$	16,944

As of September 30, 2009 and December 31, 2008, all of the Company’s goodwill was allocated to the core reporting segment.

Consolidated Companies

Effective May 1, 2008, in connection with the Company’s purchase of stock in Vcommerce in December 2006, the Company received additional shares of Vcommerce stock. Following the Company’s receipt of these additional shares, the Company accounted for Vcommerce, which was previously accounted for under the equity method, under the consolidation method. The purchase price, including the $15.2 million carrying value of Vcommerce that had been accounted for under the equity method, was allocated to the assets and liabilities based on their respective fair values at the date of the acquisition. As of May 1, 2008, the assets and liabilities were allocated as follows: $17.9 million of goodwill; $0.9 million of intangibles; and $3.6 million of net liabilities.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Ownership Interests in Partner Companies and Goodwill — (Continued)

During the six months ended June 30, 2009, the Company concluded that the estimated fair value of Vcommerce had declined. Accordingly, the Company performed its goodwill impairment testing as described in Note 2, “Significant Accounting Policies,” and determined that an impairment of goodwill of $3.8 million was required.

During the three months ended September 30, 2009, Channel Intelligence acquired substantially all of the assets and certain liabilities of Vcommerce. As a result of this transaction, the Company recorded an additional impairment charge in the amount of $1.1 million to eliminate the Company’s remaining basis in Vcommerce, which has ceased operations. The Company has no future obligation for Vcommerce’s liabilities and does not expect any future proceeds. Subsequent to the transaction, Vcommerce’s residual assets and liabilities are immaterial and not included on the Company’s Consolidated Balance Sheet at September 30, 2009.

Other Consolidated Company Information

On January 1, 2009, the Company adopted revised guidance related to accounting for noncontrolling interests. This guidance requires the pro forma disclosure of consolidated net income (loss) attributable to the parent company and pro forma earnings (loss) per share as if the Company had continued to apply the initial guidance. The losses attributed to the noncontrolling interest that resulted in a deficit noncontrolling interest balance for the three and nine months ended September 30, 2009 were $0.4 million and $1.3 million, respectively. Accordingly, had the Company recorded 100% of these losses, the Company’s “Net income (loss) attributable to Internet Capital Group, Inc.” on its Consolidated Statements of Operations would have been $2.7 million and $(17.7) million in the respective periods. The Company’s “Net income (loss) attributable to Internet Capital Group, Inc.” per basic and diluted share would have each been $0.07 and $(0.48) for the three and nine months ended September 30, 2009, respectively, had the Company recorded 100% of these losses.

Equity Method Companies

The following unaudited summarized financial information relates to the Company’s partner companies accounted for under the equity method of accounting at September 30, 2009 and December 31, 2008. This aggregate information has been compiled from the financial statements and capitalization tables of the respective equity method partner companies.

		Approximate Voting Ownership:
Equity Method Partner Company		September 30, 2009				December 31, 2008
Acquirgy			25	%			—
Channel Intelligence			50	%(1)			46	%
ClickEquations			33	%			30	%
Freeborders			31	%			31	%
GoIndustry			26	%			29	%
Metastorm			33	%			33	%
StarCite			36	%			34	%
WhiteFence			36	%			36	%

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Ownership Interests in Partner Companies and Goodwill — (Continued)

Balance Sheets (Unaudited)

		September 30, 2009 (1)				December 31, 2008 (2)
		(in thousands)
Cash, cash equivalents and short-term investments		$	54,187			$	47,749
Other current assets			61,106				72,935
Other non-current assets			153,645				163,248
Total assets		$	268,938			$	283,932
Current liabilities		$	115,368			$	141,414
Non-current liabilities			9,013				8,791
Long-term debt			11,235				1,843
Stockholders’ equity			133,322				131,884
Total liabilities and stockholders’ equity		$	268,938			$	283,932
Total carrying value		$	85,010			$	83,751

At September 30, 2009, the Company’s carrying value in equity method partner companies in the aggregate exceeded the Company’s share of net assets of these equity partner companies by approximately $42.6 million. This excess is allocated $33.9 million to goodwill, which is not amortized, and $8.7 million to intangibles, which are generally amortized over a range of three to seven years. Amortization expense associated with these intangibles was $0.5 million and $1.5 million for the three and nine months ended September 30, 2009, respectively, and $0.4 million and $1.0 million for the three and nine months ended September 30, 2008, respectively. This amortization expense is included in the line item “Equity loss excluding impairments” in the following table and in the line item “Equity loss” on the Company’s Consolidated Statements of Operations.

Results of Operations (Unaudited)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009 (1)				2008 (2)				2009 (1)				2008 (2)
		(in thousands)								(in thousands)
Revenue		$	57,061			$	66,993			$	169,615			$	185,546
Net income (loss)		$	(6,172	)		$	(10,664	)		$	(24,793	)		$	(46,707	)
Equity loss excluding impairments		$	(2,761	)		$	(6,020	)		$	(10,094	)		$	(17,842	)
Impairment charge of GoIndustry			—				—				(544	)			—
Total equity loss		$	(2,761	)		$	(6,020	)		$	(10,638	)		$	(17,842	)

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3. Ownership Interests in Partner Companies and Goodwill — (Continued)

Other Equity Company Information

In February 2008, GoIndustry issued equity in conjunction with a financing and an acquisition transaction. In conjunction with the financing, the Company purchased an additional 52,690,950 shares of GoIndustry in exchange for approximately $10.5 million. In connection with the acquisition of DoveBid, Inc., GoIndustry issued additional shares of stock. As a result of these transactions, the Company’s ownership in GoIndustry was reduced from approximately 31% to approximately 29%. The reduction in the Company’s ownership interest in GoIndustry was accounted for as a disposition of shares and resulted in a dilution loss for accounting purposes. The dilution loss totaled $1.3 million and was recorded as an equity transaction with a decrease to additional paid-in capital during the three months ended March 31, 2008. In January 2009, the Company purchased $1.4 million of convertible long-term notes from GoIndustry. In September 2009, in conjunction with a financing transaction, these long-term notes were converted to 56,952,636 shares of GoIndustry and the Company purchased an additional 63,888,889 shares of GoIndustry for approximately $1.9 million. At September 30, 2009, the Company owned 254,674,377 shares of GoIndustry, or approximately 26% of the outstanding shares, as compared to 133,832,852 shares of GoIndustry, or approximately 29% of the outstanding shares prior to the August 2009 financing transaction. The reduction in the Company’s ownership interest in GoIndustry from 29% to 26% was accounted for as a disposition of shares and resulted in a dilution loss of $0.4 million in the three months ended September 30, 2009. In accordance with revised accounting guidance for equity method companies, this dilution loss was recorded in “Other income (loss), net” on the Company’s Consolidated Statements of Operations. Due to the Company’s 26% ownership, GoIndustry continues to be accounted for under the equity method.

An impairment charge of $0.5 million was recorded by the Company during the three months ended March 31, 2009 to reduce the Company’s basis in GoIndustry as a result of declines in the fair value of this partner company. As of September 30, 2009, no further impairment was required.

In February 2009, the Company entered into certain arrangements to guarantee approximately $3.6 million of debt for StarCite. This amount, which had been placed in an escrow account at the time of the arrangement, was classified as restricted cash as of March 31, 2009. In May 2009, the Company repaid the underlying debt in full and thereafter received an additional ownership interest in StarCite. Accordingly, the Company increased its ownership in the partner company to 35% as of June 30, 2009 from 34% as of March 31, 2009, and decreased restricted cash by the amount paid. The Company has made a preliminary allocation of this purchase price and is in the process of finalizing its purchase price allocation for this transaction. The Company’s ownership interest in the partner company further increased to 36% as of September 30, 2009, as a result of equity transactions at the partner company.

On July 31, 2009, the Company acquired a 25% ownership percentage in Acquirgy. Also during the three months ended September 30, 2009, the Company increased its ownership percentage at Channel Intelligence and ClickEquations through the Company’s participation in financing rounds. The total amount of these acquisitions was $5.3 million. The Company has made preliminary allocations of the respective purchase prices and is in the process of finalizing its purchase price allocations for these transactions.

Escrow Information

As of September 30, 2009, the Company has outstanding aggregate cash proceeds, subject to indemnity claims, of approximately $2.6 million associated with escrowed proceeds from sales of former equity method partner companies. Additionally, the Company has outstanding 60,440 shares of IntercontinentalExchange, Inc. (“ICE”) common stock, valued at approximately $5.9 million based on the September 30, 2009 closing stock price of ICE’s common stock, being held in escrow. These share escrows primarily relate to sale consideration that was set aside to satisfy potential purchase price adjustments and/or potential indemnity claims in connection with the sale of Creditex Group, Inc. (“Creditex”) to ICE on August 29, 2008. During the nine months ended September 30, 2009, the Company received a distribution of approximately $1.2 million of previously escrowed funds related to the Company’s former partner company, Marketron International, Inc. (“Marketron”), which was recorded in “Other income (loss), net” on the Company’s Consolidated Statement of Operations. The release of additional escrowed proceeds, if any, to the Company would result in additional gains at the time the Company is entitled to such proceeds, the amount is fixed or determinable and realization is assured, which is anticipated to occur at various times between March 2010 and August 2012.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Marketable Securities and Related Derivatives

Marketable securities represent the Company’s holdings in publicly-traded equity securities accounted for under the cost method of accounting. At September 30, 2009, the Company held a noncontrolling interest in Blackboard, Inc. (“Blackboard”), which is traded on the NASDAQ Global Market. The cost, unrealized holding gains/(losses), and fair value of marketable securities at September 30, 2009 and December 31, 2008 were as follows:

										Unrealized
		Common Shares								Holding
		Owned				Cost				Gains/(Losses)				Fair Value
						(in thousands, except shares)
September 30, 2009
Blackboard			1,787,060			$	2,584			$	64,931			$	67,515
December 31, 2008
Blackboard			2,187,060			$	3,162			$	54,205			$	57,367

The amounts reflected as the Company’s cost for Blackboard include the carrying value on the date the partner company converted to marketable securities and the value of warrants exercised.

During the three months ended September 30, 2009, the Company sold 400,000 shares of Blackboard common stock at an average price of $36.50 per share. The Company received total proceeds of $14.6 million, including proceeds of $5.7 million for September 2009 trades that settled in October 2009 and are reflected as “Broker receivable” on the Company’s Consolidated Balance Sheet at September 30, 2009. The Company recognized a gain on the sale of these securities in the amount of $14.0 million. This gain is included in “Other income (loss), net” on the Company’s Consolidated Statements of Operations.

The Company manages its exposure to and benefits from price fluctuations of Blackboard common stock by using derivative securities or hedges. Although these instruments are derivative securities, their economic risks are similar to, and managed on the same basis as, the risks associated with the Blackboard shares the Company holds. Through September 30, 2009, the Company has entered into cashless collar contracts with various expiration dates in 2010 to hedge 1,625,000 shares of its total holdings of 1,787,060 shares of Blackboard common stock at weighted average minimum and maximum prices per share of $24.27 and $56.35, respectively.

These instruments are marked to market through earnings each period. The mark-to-market impact is reflected in “Other income (loss), net” for the appropriate period on the Company’s Consolidated Statements of Operations as follows:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(in thousands)
Unrealized gain (loss) on mark to market of hedges		$	(3,393	)		$	(1,647	)		$	(5,950	)		$	581

The income or loss is primarily driven by the change in the closing price of Blackboard stock from the beginning of the quarter to the end of the quarter. The price per share is reflected in the table below as reported by the NASDAQ Global Market:

		Dec. 31,				March 31,				June 30,				Sep. 30,				Dec. 31,				March 31,				June 30,				Sep. 30,
		2007				2008				2008				2008				2008				2009				2009				2009
Blackboard closing stock price		$	40.25			$	33.33			$	38.23			$	40.29			$	26.23			$	31.74			$	28.86			$	37.78

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

4. Marketable Securities and Related Derivatives — (Continued)

In future quarters, the mark-to-market impact will generally be an expense if Blackboard’s stock price rises, or income if Blackboard’s stock price declines, during the relevant quarter. If the Company holds these hedges through their maturity dates and Blackboard’s stock price remains within the weighted average minimum and maximum prices per share, the value of the hedges will be zero at maturity.

The fair value of these instruments was an asset of $0.6 million at September 30, 2009 and an asset of $6.5 million at December 31, 2008, and, in each period, is included in “Hedges of marketable securities” on the Company’s Consolidated Balance Sheets. See Note 5, “Financial Instruments.”

5. Financial Instruments

Derivative Financial Instruments

The Company utilizes derivative financial instruments, the Blackboard security hedges and forward exchange contracts, to manage its exposure to and benefits from price fluctuations of Blackboard common stock and foreign currency risk, respectively. The cashless collar contracts related to Blackboard common stock are discussed in Note 4, “Marketable Securities and Related Derivatives.” In addition, during the nine months ended September 30, 2009, ICG Commerce purchased a put option to mitigate the risk of currency fluctuations at ICG Commerce’s operations in the United Kingdom and Europe. The value of the put option as of September 30, 2009 approximated zero.

The following table presents the classifications and fair values of our derivative instruments as of September 30, 2009 and December 31, 2008:

Consolidated Balance Sheets
						September 30,				December 31,
Derivatives		Classification				2009				2008
						(in thousands)
Cashless collar contracts		Hedges of marketable securities				$	601			$	6,551
Foreign exchange put option		Other assets, net				$	—			$	—

The following table presents the mark-to-market impact on earnings resulting from our hedging activities for the periods ended September 30, 2009 and 2008:

Consolidated Statements of Operations
						Three months ended								Nine months ended
						September 30,								September 30,
						(in thousands)
Derivatives		Classification				2009				2008				2009				2008
Cashless collar contracts		Other income (loss), net				$	(3,393	)		$	(1,647	)		$	(5,950	)		$	581
Foreign exchange put option		Other income (loss), net				$	(5	)		$	—			$	(33	)		$	—

Fair Value Measurements

In September 2006, the FASB issued accounting guidance for fair value measurements. This guidance clarifies the definition of fair value, establishes a three-tier hierarchy framework for measuring fair value and expands the disclosures on fair value measurements. In accordance with accounting guidance regarding fair value measurements and disclosures, our marketable securities are reported at fair value on our consolidated balance sheet based on quoted prices in active markets for identical or comparable assets.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Financial Instruments — (Continued)

The fair value of the Company’s financial assets measured at fair value on a recurring basis were as follows:

		Balance at
		September 30,
		2009				Level 1				Level 2				Level 3
		(in thousands)
Cash equivalents (money market accounts)		$	70,667			$	70,667			$	—			$	—
Marketable securities (see Note 4)			67,515				67,515				—				—
Hedges of marketable securities (see Note 5)			601				—				601	(a)			—
Hedges of foreign currency risk (see Note 5)			—				—				—	(a)			—
		$	138,783			$	138,182			$	601			$	—

6. Debt

Long-term Debt

The Company’s long-term debt at September 30, 2009 of $0.2 million relates to its consolidated partner companies. The long-term debt is due as follows: $0.1 million is classified as current and is due within one year, and the remaining $0.1 million is due through 2014.

Loan and Credit Agreements

On September 30, 2002, the Company entered into a loan agreement with Comerica Bank (the “Loan Agreement”) to provide for the issuance of letters of credit up to $20.0 million, subject to a cash-secured borrowing base as defined by the Loan Agreement. The Loan Agreement was reduced to $10.0 million in 2004. In December 2008, the Loan Agreement was extended to December 12, 2009. Issuance fees of 0.50% per annum of the face amount of each letter of credit will be paid to Comerica Bank subsequent to issuance. The Loan Agreement also is subject to a 0.25% per annum unused commitment fee payable to the bank quarterly. No amounts (letters of credit) were outstanding at September 30, 2009 or December 31, 2008.

On May 8, 2008, the Company entered into a series of loan agreements with Credit Suisse Capital LLC. Pursuant to these agreements, the Company may, from time to time, borrow funds secured by the cashless collar contracts that the Company previously entered into with respect to 1,625,000 of its shares of Blackboard common stock. The loans bear interest, which is payable quarterly in arrears, at the three-month U.S. dollar LIBOR rate, computed on the basis of a 30-day month and a 360-day year. This interest rate resets on the first day of each calendar quarter. The maturity of each of the loans corresponds with the expiration of the underlying cashless collar contract. Accordingly, the maturity dates of the loans range from March 15, 2010 to October 15, 2010. The maximum borrowing capacity under each of the loan agreements equals the present value of the minimum value of the underlying cashless collar contract, computed using the three month U. S. dollar LIBOR rate. The aggregate maximum borrowing capacity under the loan agreements is approximately $39.4 million as of September 30, 2009. The Company has not drawn any amounts under the loan agreements to date.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

6. Debt — (Continued)

On August 29, 2008, ICG Commerce and a number of its wholly-owned subsidiaries entered into a loan agreement with PNC Bank, pursuant to which ICG Commerce and such subsidiaries may borrow up to $10.0 million under a revolving line of credit. The line of credit matures on December 31, 2009 and is secured by the assets of the borrowing companies. Interest on any outstanding amounts is computed at a rate to be selected by ICG Commerce at the end of each interest period from the following: (1) a one, two, three or six-month eurodollar LIBOR rate plus either 175 or 200 basis points, depending on the then-current debt-to-EBITDA ratio of the borrowing companies, and (2) PNC Bank’s prime rate minus either 100 or 75 basis points, depending on the then-current debt-to-EBITDA ratio of the borrowing companies. The loan agreement also provides for the issuance by the bank of letters of credit, subject to specified fees and other terms. The loan agreement is subject to a 0.25% per annum unused commitment fee that is payable to the bank quarterly. As of September 30, 2009, no amounts are outstanding under this loan agreement. ICG Commerce had a total borrowing capacity of $10.0 million, with interest rates between 2.00% and 2.38%.

7. Segment Information

The Company’s reportable segments using accounting guidance for segment reporting consist of two reporting segments, the “core” segment and the “other holdings” segment. Each segment includes the results of the Company’s consolidated partner companies and records the Company’s share of earnings and losses of partner companies accounted for under the equity method of accounting and captures the Company’s basis in the assets of all of its partner companies. Marketable securities are considered “corporate” assets whereas, prior to becoming marketable securities, the partner company to which they relate would have been included in the core or other holdings category.

The core reporting segment includes those partner companies in which the Company’s management takes a very active role in providing strategic direction and management assistance. The other holdings reporting segment includes holdings in companies over which, in general, we have less influence due to the fact that they are public or we have a relatively small ownership stake.

Approximately 10% of the Company’s consolidated revenues for the three and nine months ended September 30, 2009, respectively, relate to sales generated in the United Kingdom. Approximately 17% and 15% of the Company’s consolidated revenues for the three and nine months ended September 30, 2008, respectively, related to sales generated in the United Kingdom. The remaining consolidated revenues for the three and nine months ended September 30, 2009 and 2008 primarily relate to sales generated in the United States. As of September 30, 2009 and December 31, 2008, the Company’s assets were located primarily in the United States.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.

Segment Information — (Continued)

The following summarizes selected information related to the Company’s segments for the respective periods. All significant intersegment activity has been eliminated. Assets are owned or allocated assets used by each reporting segment.

Segment Information
(in thousands)
						Other				Total				Reconciling Items								Consolidated
		Core				Holdings				Segment				Corporate				Other*				Results
Three Months Ended September 30, 2009
Revenues		$	22,572			$	—			$	22,572			$	—			$	—			$	22,572
Net income (loss)		$	(1,742	)		$	(638	)		$	(2,380	)		$	(3,366	)		$	8,817			$	3,071
Three Months Ended September 30, 2008
Revenues		$	17,104			$	—			$	17,104			$	—			$	—			$	17,104
Net income (loss)		$	(7,886	)		$	(900	)		$	(8,786	)		$	(3,803	)		$	35,087			$	22,498
Nine Months Ended September 30, 2009
Revenues		$	66,301			$	—			$	66,301			$	—			$	—			$	66,301
Net income (loss)		$	(6,040	)		$	(2,398	)		$	(8,438	)		$	(12,057	)		$	4,012			$	(16,483	)
Nine Months Ended September 30, 2008
Revenues		$	50,707			$	—			$	50,707			$	—			$	—			$	50,707
Net income (loss)		$	(20,088	)		$	(1,834	)		$	(21,922	)		$	(13,847	)		$	39,419			$	3,650

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
*Corporate other income (loss) (Note 9)		$	10,220			$	34,791			$	10,438			$	40,237
Corporate income tax (expense) benefit			—				330				—				330
Noncontrolling interest			(277	)			(34	)			(1,006	)			(1,148	)
Impairment of GoIndustry (Other Holdings) (Note 3)			—				—				(544	)			—
Impairment of Vcommerce (Core) (Note 3)			(1,126	)			—				(4,876	)			—
		$	8,817			$	35,087			$	4,012			$	39,419

						Other				Total												Consolidated
		Core				Holdings				Segment				Corporate				Other				Results
Assets as of:
September 30, 2009		$	130,303			$	11,204			$	141,507			$	131,563			$	—			$	273,070
Assets as of:
December 31, 2008		$	138,374			$	8,281			$	146,655			$	138,925			$	—			$	285,580

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Parent Company Financial Information

Parent company financial information is provided to present the financial position and results of operations of the Company and its wholly-owned subsidiaries as if the partner companies accounted for under the consolidation method of accounting were accounted for under the equity method of accounting for all applicable periods presented. The Company’s share of the consolidated partner companies’ losses is included in “Equity loss” in the parent company Statements of Operations for all periods presented based on the Company’s ownership percentage in each period. The carrying value of the consolidated companies as of September 30, 2009 and December 31, 2008 is included in “Ownership interests in partner companies” in the parent company balance sheets set forth below.

Parent Company Balance Sheets

		As of September 30, 2009				As of December 31, 2008
		(in thousands)
Assets
Cash and cash equivalents		$	56,243			$	73,208
Broker receivable			5,653				—
Other current assets			1,166				1,405
Current assets			63,062				74,613
Ownership interests in partner companies			116,620				113,395
Marketable securities			67,515				57,367
Hedges of marketable securities			601				6,551
Other			385				394
Total assets		$	248,183			$	252,320
Liabilities and stockholders’ equity
Current liabilities		$	3,569			$	4,011
Non-current liabilities			350				898
Stockholders’ equity			244,264				247,411
Total liabilities and stockholders’ equity		$	248,183			$	252,320

Parent Company Statements of Operations

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(in thousands)
Revenues		$	—			$	—			$	—			$	—
Operating expenses
General and administrative			3,452				4,065				12,357				15,214
Impairment related and other			1,126				—				4,876
Total operating expenses			4,578				4,065				17,233				15,214
			(4,578	)			(4,065	)			(17,233	)			(15,214	)
Other income (loss), net			10,220				34,791				10,438				40,237
Interest income (expense), net			86				262				300				1,367
Income (loss) before income taxes and equity loss			5,728				30,988				(6,495	)			26,390
Income tax benefit (expense)			—				330				—				330
Equity loss			(2,657	)			(8,820	)			(9,988	)			(23,070	)
Net income (loss)		$	3,071			$	22,498			$	(16,483	)		$	3,650

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

8. Parent Company Financial Information — (Continued)

Parent Company Statements of Cash Flows

		Nine Months Ended
		September 30,
		2009				2008
		(in thousands)
Operating Activities
Net income (loss)		$	(16,483	)		$	3,650
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization			75				100
Equity-based compensation			2,782				4,941
Equity loss			9,988				23,070
Other (income) loss			(10,438	)			(40,237	)
Impairment related and other			4,876
Changes in assets and liabilities, net of effect of acquisitions:
Prepaid expenses and other assets			139				(158	)
Accounts payable			(8	)			4
Accrued expenses			(19	)			(285	)
Accrued compensation and benefits			(891	)			(1,608	)
Other liabilities			(60	)			403
Cash provided by (used in) operating activities			(10,039	)			(10,120	)
Investing Activities
Capital expenditures, net			(20	)			(33	)
Proceeds from sales of marketable securities			9,103				30,194
Proceeds from sales of ownership interests in partner companies			2,607				3,206
Acquisitions of ownership interests in partner companies, net			(18,246	)			(40,448	)
Cash provided by (used in) investing activities			(6,556	)			(7,081	)
Financing Activities
Purchase of treasury stock			(370	)			(239	)
Cash provided by (used in) financing activities			(370	)			(239	)
Net increase (decrease) in cash and cash equivalents			(16,965	)			(17,440	)
Cash and cash equivalents at beginning of period			73,208				69,125
Cash and cash equivalents at end of period		$	56,243			$	51,685

9. Other Income (Loss)

Other Income (Loss), net

Other income (loss), net consists of the effect of transactions and other events relating to the Company’s ownership interests in its partner companies and its operations in general.

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(in thousands)
Gain on sale of Creditex		$	—			$	34,751			$	430			$	34,751
Unrealized gain (loss) on mark-to-market of hedges (Note 4)			(3,393	)			(1,647	)			(5,950	)			581
Gains on sales/distributions of ownership interests in partner companies			—				—				2,177				3,205
Dilution loss on GoIndustry (Note 3)			(388	)			—				(388	)			—
Realized gains on marketable securities (Note 4)			14,004				1,406				14,178				1,406
Other			(3	)			281				(9	)			294
		$	10,220			$	34,791			$	10,438			$	40,237
Total other income (loss) for consolidated partner companies			6				(423	)			787				(381	)
		$	10,226			$	34,368			$	11,225			$	39,856

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Other Income (Loss) — (Continued)

During the nine months ended September 30, 2009, the Company received an additional 7,549 shares of ICE common stock in connection with a post-merger closing-related adjustment for the acquisition of Creditex by ICE in August 2008. The value of these shares on the date on which they were received was $0.4 million, which is included in “Gain on sale of Creditex” in the above table. The amount of proceeds received by the Company from the subsequent sale of these securities in excess of their initial value is included in “Realized gains (losses) on marketable securities” in the above table.

During the nine months ended September 30, 2009, the Company recorded gains of approximately $2.2 million related to distributions of various ownership interests, including the release of approximately $1.2 million of escrowed proceeds related to Marketron. These gains are included in “Gains on sales/distributions of ownership interests in partner companies” in the above table.

During the nine months ended September 30, 2009, ICG Commerce recorded foreign currency gains of approximately $0.8 million related to changes in exchange rates associated with its operations in the United Kingdom and Europe.

10. Income Taxes

The parent company files a consolidated federal income tax return with Investor Force. Excluding the loss for the nine months ended September 30, 2009, the parent company and Investor Force together had federal net operating loss carry-forwards of approximately $515.0 million. They also had combined capital loss carry-forwards of approximately $366.5 million that may be used to offset future capital gains. All but approximately $20.0 million of the net operating loss carry-forwards and all of the capital loss carry-forwards, as well as certain other deferred tax assets, are subject to significant limitations on their utilization due to an ownership change, as defined in Section 382 of the Internal Revenue Code. The annual limitation on the utilization of these carry-forwards is approximately $14.5 million. These net operating loss carry-forwards expire between 2015 and 2024, and the capital loss carry-forwards expire between 2009 and 2013. Additional limitations on the utilization of these carry-forwards may be imposed if they experience another ownership change.

The parent company’s and Investor Force’s combined net deferred tax asset of $441.2 million at September 30, 2009 consists of deferred tax assets of $462.4 million, relating primarily to partner company basis differences, capital and net operating loss carry-forwards, offset by deferred tax liabilities of $21.2 million, primarily related to unrealized appreciation in available for sale securities. A full valuation allowance has been recorded against the net deferred tax assets.

The Internal Revenue Service is auditing the parent company’s consolidated federal income tax returns for the years ended December 31, 2005 through December 31, 2007. The statute of limitations for the year ended December 31, 2005 has been extended to September 15, 2010.

ICG Commerce recorded tax expense at an effective annual rate of 12.0% and 10.8% for the nine months ended September 30, 2009 and 2008, respectively. These rates differ from the federal statutory rate of 34%, primarily due to the utilization of net operating losses. ICG Commerce also recorded a $0.3 million tax benefit in the nine months ended September 30, 2009 for a foreign tax refund received as a result of the allowance of the utilization of net operating losses that previously had been disallowed.

At December 31, 2008, ICG Commerce had federal net operating losses of approximately $164.0 million. Due to an ownership change experienced by ICG Commerce, a majority of these net operating losses, as well as certain other deferred tax assets, are subject to significant limitations on their utilization. ICG Commerce had a net deferred tax asset as of December 31, 2008 of approximately $63.7 million, comprised primarily of net operating losses. A full valuation allowance was recorded against the net deferred tax asset.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11. Equity-Based Compensation

Equity-based compensation for the three and nine months ended September 30, 2009 and 2008 is primarily included in “Selling, general and administrative” on the Company’s Consolidated Statements of Operations for their respective periods. The following table provides additional information related to the Company’s equity-based compensation:

																		Unrecognized				Weighted Average
																		Equity-Based				Years Remaining of
		Three Months Ended								Nine Months Ended								Compensation at				Equity-Based
		September 30,								September 30,								September 30,				Compensation Expense
		2009				2008				2009				2008				2009				at September 30, 2009
		(in thousands, except weighted average years)
SARs*		$	452			$	1,016			$	2,437			$	2,990			$	1,610				2.7
Stock Options			—				8				3				25				2				3.2
Restricted Stock			18				408				53				1,440				117				2.0
DSUs**			36				78				138				241				60				0.5
Equity-Based Compensation		$	506			$	1,510			$	2,631			$	4,696			$	1,789
Equity-Based Compensation for Consolidated Partner Companies			174				230				546				580				940				1.9
Equity-Based Compensation		$	680			$	1,740			$	3,177			$	5,276			$	2,729

During the nine months ended September 30, 2009, the Company issued 36,000 DSUs to the Company’s non-management directors under the Non-Management Director Compensation Plan that will vest in the first quarter of 2010. These DSUs were valued at $0.1 million.

During the three and nine months ended September 30, 2009, the Company issued 7,385 DSUs and 27,916 DSUs, respectively, in lieu of cash, which vested immediately to the Company’s non-management directors for services provided to the Company’s Board of Directors and its committees. The expense of $0.1 million and $0.2 million for the three and nine months ended September 30, 2009, respectively, and the expense of $0.1 million and $0.2 million for the three and nine months ended September 30, 2008, respectively, associated with the quarterly grants for service is included in “Selling, general and administrative” on the Company’s Consolidated Statements of Operations but is not included in the “Equity-Based Compensation” table above.

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. Net Income (Loss) per Share

The calculations of net income (loss) per share were:

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2009				2008				2009				2008
		(in thousands, except per share data)
Basic and Diluted:
Net income (loss) attributable to Internet Capital Group, Inc.		$	3,071			$	22,498			$	(16,483	)		$	3,650
Basic:
Net income (loss) attributable to Internet Capital Group, Inc. per share		$	0.08			$	0.59			$	(0.45	)		$	0.10
Diluted
Net income (loss) attributable to Internet Capital Group, Inc. per share		$	0.08			$	0.58			$	(0.45	)		$	0.09
Shares used in computation of basic income (loss) per share			36,675,632				38,437,322				36,672,848				38,410,364
Stock options			39,221				53,184				—				69,527
Restricted stock			138				273,932				—				307,596
DSUs			25,204				15,890				—				13,740
Warrants			—				3,582				—				4,297
SARs			—				—				—				74,010
Shares used in computation of diluted income (loss) per share			36,740,195				38,783,910				36,672,848				38,879,534

The following dilutive securities were not included in the computation of diluted net loss per share because their effect would have been anti-dilutive:

						Weighted Average
		Shares				Price Per Share
Three Months Ended September 30, 2009
SARs			3,870,370			$	7.65
Stock options			490,183			$	38.41
Restricted stock			14,137			$	—
DSUs			10,796			$	—
Nine Months Ended September 30, 2009
SARs			3,870,370			$	7.65
Stock options			529,404			$	35.56
Restricted stock			14,275			$	—
DSUs			36,000			$	—
Three Months Ended September 30, 2008
SARs			3,870,370			$	7.65
Stock options			469,430			$	35.59
Nine Months Ended September 30, 2008
SARs			2,597,645			$	8.45
Stock options			381,141			$	34.36