Mecklermedia Corp - FORM 10-K

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EXCEL - IDEA: XBRL DOCUMENT - Mecklermedia Corp	Financial_Report.xls
EX-31.1 - CERTIFICATION - Mecklermedia Corp	webmediabrands_10k-ex3101.htm
EX-23.1 - CONSENT - Mecklermedia Corp	webmediabrands_10k-ex2301.htm
EX-31.2 - CERTIFICATION - Mecklermedia Corp	webmediabrands_10k-ex3102.htm
EX-32.1 - CERTIFICATION - Mecklermedia Corp	webmediabrands_10k-ex3201.htm
EX-32.2 - CERTIFICATION - Mecklermedia Corp	webmediabrands_10k-ex3202.htm
EX-21.1 - SUBSIDIARIES OF THE REGISTRANT - Mecklermedia Corp	webmediabrands_10k-ex2101.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________

Commission file number: 000-26393

WebMediaBrands Inc.

(Exact name of Registrant as specified in its charter)

Delaware	06-1542480
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

50 Washington Street, Suite 912 Norwalk, Connecticut	06854
(Address of principal executive offices)	(Zip Code)

(203) 662-2800

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock $.01 par value	The NASDAQ Stock Market LLC

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 15(d) of the Act. Yes ¨ No x

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

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

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. 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 o
Non-accelerated filer o		Smaller reporting company x
(Do not check if a smaller reporting company)

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

The aggregate market value of voting and non-voting common stock held by non-affiliates of the registrant as of June 30, 2011, based upon the last sale price of such common stock on that date as reported by the Nasdaq National Market was $30,499,425.

The number of shares of the outstanding registrant’s Common Stock as of March 15, 2012 was 41,593,473.

Information required by Part III of this Form 10-K, to the extent not set forth herein, is incorporated by reference to the registrant’s definitive proxy statement for its 2012 annual meeting of stockholders, which will be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 within 120 days after the end of the fiscal year to which this Form 10-K relates.

WebMediaBrands Inc.

Annual Report on Form 10-K

Table of Contents

		Page
Part I
Item 1.	Business	3
Item 1A.	Risk Factors	6
Item 1B.	Unresolved Staff Comments	13
Item 2.	Properties	13
Item 3.	Legal Proceedings	13
Item 4.	Mine Safety Disclosures	13
Part II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6.	Selected Financial Data	14
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	22
Item 8.	Financial Statements and Supplementary Data	23
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	43
Item 9A .	Controls and Procedures	43
Item 9B.	Other information	43
Part III
Item 10.	Directors, Executive Officers of the Registrant	44
Item 11.	Executive Compensation	44
Item 12.	Security Ownership of Certain Beneficial Owners and Management	44
Item 13.	Certain Relationships and Related Transactions	44
Item 14.	Principal Accountant Fees and Services	44
Part IV
Item 15.	Exhibits	45
Signatures		48

“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995: Statements in this Form 10-K that are not historical facts are “forward-looking statements” pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The potential risks and uncertainties address a variety of subjects including, for example: the competitive environment in which WebMediaBrands competes; the unpredictability of WebMediaBrands’s future revenues, expenses, cash flows and stock price; WebMediaBrands’s ability to integrate acquired businesses, products and personnel into its existing businesses; WebMediaBrands’s ability to protect its intellectual property; and WebMediaBrands’s dependence on other companies posting job listings on its Websites. For a more detailed discussion of such risks and uncertainties, refer to Item 1A. The forward-looking statements included herein are made as of the date of this Form 10-K, and WebMediaBrands assumes no obligation to update the forward-looking statements after the date hereof.

Part I

ITEM 1.

BUSINESS

Overview

WebMediaBrands is an Internet media company that provides content, education and career services to social media, traditional media and creative professionals through a portfolio of vertical online properties, communities and trade shows. Our online business includes:

●

mediabistro.com, a leading blog network providing content, education, community resources and career resources about major media industry verticals including new media, social media, Facebook, TV news, advertising, public relations, publishing, design and mobile that includes the following:

10,000Words	AllTwitter	FishbowlLA	MediaJobsDaily	TVNewser
AgencySpy	eBookNewser	FishbowlNY	PRNewser	TVSpy
AllFacebook	FishbowlDC	GalleyCat	SocialTimes	UnBeige

		Our mediabistro.com business also includes an industry-leading job board for media and creative professionals focusing on job categories such as social media, new media, publishing, public relations/marketing, advertising, sales, design, web development, television and more;

	●	InsideNetwork.com, a leading network of online properties dedicated to providing original market research, data services, news, events and job listings on the Facebook platform, on social gaming and on mobile applications ecosystems that includes the following:

		AppData	Inside Mobile Apps	Inside Virtual Goods
		Inside Facebook	Inside Social Games	The Facebook Marketing Bible

●

SemanticWeb.com, a leading blog providing content, education, community resources and career resources on the commercialization and application of Semantic Technologies, Linked Data and Big Data.

●

Community, membership and e-commerce offerings including a freelance listing service, a marketplace for designing and purchasing logos (stocklogos.com) and premium membership services.

Our education business features online and in-person courses and online conferences, including our Social Media Marketing Boot Camps, for media and creative professionals. Online education conferences are large-scale programs that offer attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, daily forum discussions within an online classroom, homework assignments, and small group interaction where students receive one-on-one guidance and instruction from an advisor.

Our trade shows include, among others, the Semantic Tech and Business Conference, Inside Social Apps, Social Gaming Summit and AllFacebook Marketing Expo.

Our online business also includes AllCreativeWorld.com, a network of online properties providing content, education, community, career and other resources for creative and design professionals.

Our businesses cross-leverage and cross-promote our content, product and service offerings. For example, users of our Websites read our content, search for jobs on our job boards, attend our trade shows, subscribe to and purchase products and services and take continuing education courses.

For information regarding the components of our revenue sources, please see Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.

Our Strategy

Our objective is to strengthen our position as a leading Internet media company that provides content, education, research, job postings and trade shows for media and creative professionals. We intend to achieve this objective by continuing to execute on the following strategies:

Create and Monetize New Offerings and Services. We expect to strengthen our existing offerings of products and services by continuing to improve our original content, courses, research and trade shows. We expect to continue to develop additional revenue sources by identifying emerging services, technologies and topics of interest and by creating original content, courses and trade shows for those topics through internal development and strategic acquisitions.

Grow Through Targeted Acquisitions. We have made a number of acquisitions since our inception and we expect to continue to pursue strategic acquisition opportunities to obtain valuable content, products, services, brands, expertise and access to new users, advertisers, clients and vendors. For example, our acquisition of Inside Network strengthens our position in covering the Facebook, social gaming and mobile applications ecosystems and further diversifies our revenue sources since a significant percentage of Inside Network’s revenue is generated from market research and data services. We believe that this acquisition will augment our editorial coverage of social media, our online education offerings and our online job board presence in the social media space. Although we are currently considering potential strategic acquisitions, we have no binding commitments or agreements with respect to any such acquisitions other than those we have reported from time to time in our filings under the Securities Exchange Act of 1934. We intend to use the experience gained from our numerous acquisitions to identify, evaluate, acquire and integrate properties that are complementary to our business.

Identify and Define Emerging Trends and New Business Opportunities. We continually search for emerging technologies and topics that are of interest to media and creative professionals. We believe that our creative and entrepreneurial culture enables us to identify technology and business shifts before these changes are apparent to most of our users and competitors.

Leverage Our Interrelated and Complementary Business Offerings. We will continue to cross-leverage and cross-promote our various products and service offerings among the users of our online businesses and attendees of our trade shows.

Corporate Information

internet.com LLC was formed on April 5, 1999 in the State of Delaware. internet.com LLC was merged with and into internet.com Corporation upon consummation of our initial public offering in June 1999.

On May 24, 2001, internet.com Corporation changed its name from internet.com Corporation to INT Media Group, Incorporated. On August 12, 2002, INT Media Group, Incorporated changed its name to Jupitermedia Corporation and on February 23, 2009, Jupitermedia Corporation changed its name to WebMediaBrands Inc.

Our principal executive offices are located at 475 Park Avenue South, Fourth Floor, New York, New York 10016 and our telephone number is (212) 389-2000.

Our Website address is www.webmediabrands.com. We make available free of charge, through a link on our Website to the Securities and Exchange Commission’s, (“SEC”), Internet site, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We also post our press releases and other information about our Company on our website. Our consolidated subsidiaries include the following: Mediabistro.com Inc., a Delaware corporation, and Inside Network, Inc., a California corporation.

Marketing and Sales

Our marketing efforts are directed largely at acquiring (i) advertising and job board clients, (ii) attendees to our courses and trade shows and (iii) clients for our research and other paid products and services.

We focus our efforts on online advertising and promotional campaigns including cross-promotion on our Website through advertisements, links, email and social media outlets, such as Twitter, LinkedIn and Facebook, including promotional links from third party Websites that attract demographically similar audiences. We also use public relations, social media outlets, user groups and speaking engagements to generate publicity for our products and services.

We focus our efforts on online advertising and promotional campaigns including cross-promotion on our Website through advertisements, links, email and social media outlets, such as Twitter and Facebook, and promotional links from third party Websites that attract demographically similar audiences. We also use public relations, social media outlets, user groups and speaking engagements to generate publicity for our products and services.

We sell most of our products and services online and through a direct sales force. Our sales force operates from our New York, New York, San Francisco, California and Norwalk, Connecticut offices.

Seasonality and Cyclicality

Customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which, together with fluctuations in job postings, directly affect our business. Our results will also be impacted by the number and type of education courses offered and by the number and size of trade shows that we hold in each calendar quarter. In addition, there might be fluctuations as trade shows held in one period in the current year may be held in a different period in future years. Expenditures by our customers tend to vary in cycles that reflect overall economic conditions as well as budgeting and buying patterns.

Customers

Our customer base is a diverse group of individuals and companies, many of which are focused on the content creation and social web industries, including many of the most popular and recognizable new and traditional media outlets. No customer accounted for more than 10% of our consolidated revenues during any of the periods presented.

Backlog

Our backlog as of December 31, 2011 and 2010 was $1.7 million and $923,000, respectively. Our backlog consists of job board postings on our networks, subscriptions to our paid subscription services and attendee registrations, exhibit space and vendor sponsorships for our trade shows. We expect we will recognize substantially all of our backlog as of December 31, 2011 as revenue in 2012.

Competition

The market for job-related services, trade shows, online education and market research is intensely competitive and rapidly changing. The number of online services competing for users’ attention and spending continues to proliferate and intensify. Competitive factors include the quantity and quality of the users of our networks, editorial quality, customer service, relevance and timeliness of our research and data services, pricing and the overall strength of our offerings. We compete for users and advertisers with media and general interest and destination Websites as well as traditional media publications. In addition, our online job board competes with Monster.com and LinkedIn and other job-related sites and services, specifically through social media. Our education business competes with the education programs offered by other Internet companies and higher education institutions. Our trade shows compete for exhibitors, sponsors and attendees with other media and marketing related events, including social media and emerging technology related events. Our market research and data services products will face increased direct and indirect competition from research firms, business consulting firms and data metrics companies as the market related to Facebook, social gaming and mobile applications ecosystems continues to evolve.

Intellectual Property

We seek protection of our proprietary content, logos, brands, domain names and software relating to our Websites, e-mail newsletters and trade shows, and attempt to protect them by relying on trademark, copyright, trade secret and other laws and restrictions.

Trademarks: We pursue the registration of certain of our trademarks and service marks in the United States and internationally. We have encountered obstacles to registration of some marks in several countries.

Trademark rights are perpetual once applications mature into registrations, for so long as statutory filings and renewals are made on a timely basis and local use requirements are met. Our trademark portfolio supports our claim to the exclusive right to use the registered marks for the goods and services listed in the applicable jurisdictions. This helps us in marketing our goods and services, building goodwill among customers and preventing infringement of our marks by third parties, which might dilute the value of these marks.

The primary marks used in our business are WebMediaBrands, mediabistro.com, and Inside Network, among others.

Copyrights: We also pursue copyright registration of our content in the United States. We own or have applied for copyright registrations pertaining to the business. We may not register all items for protection and we may not be successful in obtaining registrations.

Domain Names: We own numerous domain name registrations, both in the United States and internationally. Domain names generally are regulated by Internet regulatory bodies. The regulation of domain names in the United States and internationally is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for registering or maintaining domain names. As a result, we might not be able to acquire or maintain comparable domain names in all the countries in which we conduct business or prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our trademarks and other proprietary rights. As a result, our business, results of operations, financial condition and cash flows could suffer.

For risks related to our intellectual property, see Item 1A. Risk Factors.

Employees

As of December 31, 2011, our business employed 71 full-time and 3 part-time employees.

ITEM 1A.

RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE MAKING AN INVESTMENT DECISION. OUR BUSINESS, FINANCIAL CONDITION OR RESULTS OF OPERATIONS COULD BE HARMED BY ANY OF THE FOLLOWING RISKS. THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE DUE TO ANY OF THE FOLLOWING RISKS, AND YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT.

Risks Related to Our Business

We have generated significant losses since inception and might not report net income in the future.

As of December 31, 2011, we had an accumulated deficit of $275.6 million. Any failure to achieve profitability could deplete our current capital resources and reduce our ability to raise additional capital in the future. Our advertising, promotion and selling and general and administrative expenses are based on expectations of future revenues and are relatively fixed in the short term. These expenses totaled $7.6 million for the year ended December 31, 2011 and $7.4 million for the year ended December 31, 2010. If our revenues are lower than expected, we might not be able to quickly reduce spending. Any shortfall in revenues would have a direct impact on operating results for a particular quarter and these fluctuations could affect the market price of our common stock.

Conditions in the global economy and the markets we serve might materially and adversely affect our business and results of operations.

Our business and operating results were adversely affected by worldwide economic conditions over the past few years, particularly in the advertising and online business sectors on which we depend. As a result of slowing global economic growth, the credit market crisis, declining consumer and business confidence, shifts in consumer spending patterns, increased unemployment, reduced levels of capital expenditures, fluctuating commodity prices, bankruptcies and other challenges currently affecting the global economy, our clients have experienced deterioration of their businesses, cash flow shortages, and difficulty obtaining financing. If the economy fails to grow or falters, existing or potential clients might delay or cancel plans to purchase our products and services and might not be able to fulfill their obligations to us in a timely fashion. Similarly, higher interest rates, inflation, higher costs of labor, insurance and healthcare, higher tax rates and other changes in tax laws, changes in other laws and regulations and other economic factors in the United States could increase our cost of sales and operating, selling, general and administrative expenses, and otherwise adversely affect our operations and operating results. If the global economy does not recover, or if the slowdown continues for a significant period, if there is significant further deterioration in the global economy or if adverse changes in laws or regulations are implemented, our financial position and cash flows could be materially adversely affected.

We might not be able to raise additional funds when needed for our business or to exploit opportunities.

We might need to raise additional funds to support expansion, develop new or enhanced applications and services, respond to competitive pressures, acquire complementary businesses or technologies or take advantage of unanticipated opportunities. If required, we might attempt to raise these additional funds through public or private debt or equity financing, strategic relationships or other arrangements. There can be no assurance that such financing will be available on acceptable terms, if at all, or that such financing will not be dilutive to our stockholders.

Because our job board constitutes a significant portion of our revenues, our revenues could decline significantly if employers decrease or cease posting jobs with us.

For the year ended December 31, 2011, our job board accounted for 34% of our revenues. We expect that our job board will continue to account for a significant portion of our revenues. In the event that employers reduce costs and hire less, an employer may reduce or terminate its commercial relationship with us and our business, results of operations and financial condition would suffer.

Our trade shows and course offerings have become more significant sources of our revenues, and our revenues could decline if our trade shows and course offerings fail to attract customers.

The success of our trade shows depends on attendees, exhibitors and sponsors. There is intense competition to attract attendees, and we must produce trade shows that are timely and attractive to exhibitors, sponsors and their targeted audience. If we fail to organize quality programming, attract sufficient numbers of attendees, exhibitors and sponsors, or generate sufficient interest in our trade shows, our revenues from trade shows would decline or fail to grow, which could harm our business. Similarly, in order for our course offerings to be successful, we must organize educational programs that are timely and attractive with quality instructors. The online education market is highly competitive, with few barriers to entry. If we fail to offer courses that our customers are interested in taking, or if we fail to contract with instructors from whom our customers want to learn, our revenues from courses would decline and our business, results of operations and financial condition would suffer.

Our research business revenues and growth could suffer if we prove unable to anticipate market trends or if we fail to provide information that is useful to our clients.

The success of our research business depends in large part on our ability to anticipate, research and analyze rapidly changing technologies and industries and on our ability to provide this information in a timely and cost-effective manner. If we are unable to continue to provide credible and reliable information that is useful to companies, our business and financial results may suffer.

Our research products and services focus on new and emerging technologies and services on the Internet and mobile environments. The Internet and mobile environments are undergoing frequent and dramatic changes, including the introduction of new products and the obsolescence of others, shifting business strategies and revenue models, changing legal and regulatory environments, the formation of numerous new companies and high rates of growth. Because of these rapid and continuous changes in these technologies and markets, we face significant challenges in providing timely analysis and advice. Many of the industries and areas on which we focus are relatively new, and it is very difficult to provide predictions and projections as to the future marketplace, revenue models and competitive factors. In addition, many companies are unclear as to how to allocate corporate resources effectively in the Internet or mobile markets. As a result, some companies may conclude that our research products are not useful to their businesses. Further, the need to continually update our research requires the commitment of substantial financial and personnel resources.

If our information proves unreliable, if we are unable to continually update our information, or if companies do not agree with our analysis of market trends, our reputation may suffer and demand for our research products and services may decline.

Some of our research and other services rely, in part, on access to third party data, systems and information. Any delay, restriction or denial of access to such data, systems and information may result in reduced demand and cancellation of such research and other services and, as a result, our revenue and growth of our research and services could be greatly reduced, which could harm our business, financial condition and cash flows.

Our business will suffer if we are unable to maintain or enhance awareness of our brands or if we incur excessive expenses attempting to promote our brands.

Promoting and strengthening our brands is critical to our efforts to attract and retain users of our Internet media properties, advertisers, customers and clients for our products, and to increase attendance at our trade shows. We believe that the importance of brand recognition will likely increase due to the increasing number of competitors entering our markets. In order to promote these brands, in response to competitive pressures or otherwise, we might have to increase our marketing budget, hire additional marketing and public relations personnel or otherwise increase our financial commitment to creating and maintaining brand loyalty among our clients. If we fail to effectively promote and maintain our brands, or incur excessive expenses attempting to promote and maintain our brands, our business and financial results would suffer, and, as a result, our stock price could fluctuate or decline.

We might fail to identify or successfully acquire assets, businesses and content that would otherwise enhance our product offerings to our customers and users, and as a result our revenue might decrease or fail to grow.

We have acquired and intend to continue to acquire, when appropriate opportunities arise, assets, businesses and content as a key component of our growth strategy. We might not be successful in identifying appropriate acquisition opportunities and, as a result, our growth strategy could be adversely affected. If we identify an appropriate acquisition opportunity, we might not be able to negotiate the terms of the acquisition successfully or finance the transaction. In order to finance any strategic acquisitions, one or more of which could be very significant to our company, we might have to incur indebtedness, use our existing cash, enter into new credit facilities and/or issue equity securities or stock options. We might be unable to obtain adequate financing for acquisitions on terms and conditions acceptable to us. In order to finance acquisitions, we may sell equity securities at a discount to our common stock’s market value. Any issuance of equity securities or stock options could result in substantial dilution to existing stockholders, particularly if there is any discount to our common stock’s market price. Any future acquisition or investment might result in amortization expenses related to intangible assets. If the market price for acquisition targets increases, or if we fail to acquire desired targets for this or any other reason, our business might fail to grow at historical rates or at all, and, as a result, our stock price could fluctuate or decline.

Our failure to successfully integrate or achieve expected synergies from recent or future acquisitions could result in increased expenses, diversion of management’s time and resources and a reduction in expected revenues or revenue growth, any of which could cause our stock price to fluctuate or decline.

With respect to any acquisitions, we might fail to successfully integrate our financial and management controls, technology, reporting systems and procedures, employees, or adequately expand, train and manage our work force. The process of integration could take a significant period of time and will require the dedication of management and other resources, which could distract management’s attention from our other operations. If we make acquisitions outside of our core businesses, assimilating the acquired technology, services or products into our operations could be difficult and costly. Our inability to successfully integrate any acquired company, assets or content, employees or the failure to achieve any expected synergies, could result in increased expenses and a reduction in expected revenues or revenue growth, and, as a result, our stock price could fluctuate or decline.

Given the tenure and experience of our CEO and his guiding role in developing our business and growth strategy since our inception, our growth might be inhibited or our operations might be impaired if we were to lose his services.

Our growth and success depends to a significant extent on our ability to retain Alan M. Meckler, our Chairman and Chief Executive Officer. Mr. Meckler has developed, engineered and stewarded the growth and operation of our business since its inception. The loss of the services of Mr. Meckler could inhibit our growth or impair our operations and, as a result, our stock price could fluctuate or decline.

Our CEO and other employees with specialized knowledge and expertise in the operation of one or more of our businesses could use that knowledge and expertise to compete against us, which could reduce our market share and revenues.

We do not have a non-competition agreement with Mr. Meckler or with any other member of management or personnel, other than in connection with certain acquisitions. As a result, we might not have any recourse if they were to join a competitor or start a competing venture. Competition from key employees or a defection by one or more of them to a competitor could harm our business and results of operations by strengthening our competitors and, as a result, reducing our market share and revenues.

Our quarterly operating results are subject to fluctuations, and our stock price might fluctuate or decline if we do not meet the expectations of investors and analysts.

Our quarterly revenues and operating results are difficult to predict and often fluctuate significantly from quarter to quarter due to a number of factors, many of which are outside of our control. Customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, both of which directly affect our business. Our results will also be impacted by the number and size of trade shows or education courses we hold in each quarter. In addition, trade shows or education courses held in one period in the current year might be held in a different period in future years. Furthermore, Internet user traffic typically drops during the summer months and during certain holiday periods, which reduces the number of advertisements to sell and deliver. Expenditures by advertisers tend to vary in cycles that reflect overall economic conditions as well as budgeting and buying patterns. Our overall revenues could be materially reduced in any period by a decline in the economic prospects of advertisers, business and media professionals or the economy in general, which could alter current or prospective customers’ spending priorities or budget cycles or extend our sales cycle for the period.

Additionally, we completed the sale of our Jupiterimages business in February 2009 and the sale of the assets related to our Internet.com business in November 2009, and we have made a number of acquisitions in recent years, all of which make it difficult to analyze our results and to compare them from period to period. Any future acquisitions or dispositions will also make our results difficult to compare from period to period. Due to such risks, you should not rely on quarter-to-quarter comparisons of our results of operations as an indicator of our future results.

We have agreed not to compete with the Jupiterimages business for five years from the date of the closing of the sale.

The agreement under which we sold Jupiterimages to Getty Images includes a non-competition obligation that lasts for a period of five years from the closing of the sale on February 23, 2009. Under this provision, we agreed that we will not, and we will cause our affiliates not to, directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of any business engaged in the same type of online imaging business or operations conducted by Jupiterimages and its subsidiaries until February 23, 2014. Additionally, we may not recruit or solicit employees of Jupiterimages until February 23, 2012. These limitations on the scope of our business operations may adversely affect our business prospects, operating results and financial condition.

We have agreed not to compete with the Internet.com business for five years from the date of the closing of the sale.

The agreement under which we sold the Internet.com business to QuinStreet includes a non-competition obligation that lasts for a period of five years from the closing of the sale on November 30, 2009. Under this provision, we agreed that we will not, and we will cause our affiliates not to, directly or indirectly, own, manage, operate, control or participate in the ownership, management, operation or control of any business engaged in the creation or publishing of content or services through web sites or other electronic media focused on the topics of (a) enterprise and/or corporate information technology and/or (b) software development and/or (c) web development. Additionally, we may not recruit or solicit employees of internet.com until November 30, 2011. These limitations on the scope of our business operations may adversely affect our business prospects, operating results and financial condition.

The impairment of a significant amount of goodwill and intangible assets on our balance sheet could result in a decrease in earnings and, as a result, our stock price could decline.

In the course of our operating history, we have acquired numerous assets and businesses. Some of our acquisitions have resulted in recording a significant amount of goodwill and/or intangible assets on our financial statements. We had $17.7 million of goodwill and net intangible assets as of December 31, 2011. This is after a non-cash impairment charge of $8.3 million to reduce the carrying value of goodwill in 2011 (see note 6 of the consolidated financial statements included in Item 8). The goodwill and/or intangible assets were recorded because the fair value of the net tangible assets acquired was less than the purchase price. We might not realize the full value of the goodwill and/or intangible assets. As a result, we evaluate goodwill and other intangible assets with indefinite useful lives for impairment on an annual basis or more frequently if events or circumstances suggest that the asset may be impaired. We evaluate other intangible assets subject to amortization whenever events or changes in circumstances indicate that the carrying amount of those assets may not be recoverable. If goodwill or other intangible assets are deemed to be impaired, we would write off the unrecoverable portion as a charge to our earnings. If we acquire new assets and businesses in the future, as we intend to do, we might record additional goodwill and/or intangible assets. The possible write-off of the goodwill and/or intangible assets could negatively impact our future earnings and, as a result, our stock price could fluctuate or decline.

Our business, which is dependent on centrally located communications and computer hardware systems, is vulnerable to natural disasters, telecommunication failures, terrorism and similar problems, and we are not fully insured for losses caused by all of these incidents.

Our operations are dependent on our communications systems and computer hardware, most of which are located in data centers at our Norwalk, Connecticut location. These systems could be damaged by fire, floods, earthquakes, power loss, telecommunication failures and similar events. Our insurance policies have limited coverage levels for loss or damages in these events and might not adequately compensate us for any losses that occur. In addition, terrorist acts or acts of war could harm our employees or damage our facilities, our clients, our clients’ customers and vendors, or cause us to postpone or cancel, or result in dramatically reduced attendance at, our trade shows, which could adversely impact our revenues, costs and expenses and financial position. The potential for future terrorist attacks, the national and international responses to terrorist attacks or perceived threats to national security, and other acts of war or hostility have created many economic and political uncertainties that could adversely affect our business and results of operations in ways that cannot be predicted, and could cause our stock price to fluctuate or decline. We are predominantly uninsured for losses and interruptions to our systems or cancellations of trade shows caused by terrorist acts and acts of war.

System failures and other events may prohibit users from accessing our networks or Websites, which could reduce traffic on our networks or Websites and result in decreased capacity for advertising space and reduced revenues.

Our networks and Websites must accommodate a high volume of traffic and deliver frequently updated information. They have in the past experienced, and may in the future experience, slower response times or decreased traffic for a variety of reasons. Since we became a public company in 1999, there have been instances where our online networks as a whole, or our Websites individually, have been inaccessible. Also, slower response times, which have occurred more frequently, can result from general Internet problems, routing and equipment problems involving third party Internet access providers, problems with third party advertising servers, increased traffic to our servers, viruses and other security breaches. We also depend on information providers to provide information and data feeds on a timely basis. Some of the services in our networks or Websites could experience temporary interruptions in service due to the failure or delay in the transmission or receipt of this information. In addition, our users depend on Internet service providers and online service providers for access to our online networks or Websites. Those providers have experienced outages and delays in the past, and may experience outages or delays in the future. Moreover, our Internet infrastructure might not be able to support continued growth of our Websites. Any of these problems could result in less traffic to our Websites or harm the perception of our networks or Websites as reliable sources of information. Less traffic on our Websites or periodic interruptions in service could have the effect of reducing advertising delivery on our Websites, registration to our trade shows, educational course offerings and access to products and services thereby reducing our advertising revenues and reducing the ability to package products or service, which could reduce revenue related to those services.

Our network operations may be vulnerable to hacking, viruses and other disruptions, which may make our products and services less attractive and reliable and could result in increased costs and reduced revenues.

Internet usage could decline if any well-publicized compromise of security occurs. “Hacking” involves efforts to gain unauthorized access to information or systems or to cause intentional malfunctions or loss or corruption of data, software, hardware or other computer equipment. Hackers, if successful, could misappropriate proprietary information or cause disruptions in our Websites. We may be required to expend capital and other resources to protect our Websites against hackers. Our Websites could also be affected by computer viruses or other similar disruptive problems, and we could inadvertently transmit viruses across our Websites to our users or other third parties. Any of these occurrences could harm our business or give rise to a cause of action against us. Providing unimpeded access to our Websites is critical to servicing our users, advertising clients and access to products and services. Our inability to provide continuous access to our Websites could cause some of our clients to discontinue purchasing our products and services and/or prevent or deter our users from accessing our Websites.

Our intellectual property is important to our business, and our failure to protect that intellectual property could result in increased expenses and adversely affect our future growth and success.

Trademarks, copyrights, domain names and other proprietary rights are important to our success and competitive position. Our failure to protect our existing intellectual property rights may result in the loss of exclusivity or the right to use our content and technologies. If we do not adequately ensure our freedom to use certain content and technology, we may have to pay others for rights to use their intellectual property, pay damages for infringement or misappropriation, and/or be prohibited from using this intellectual property.

We seek protection of our content, logos, brands, domain names and other proprietary rights relating to our businesses, including the registration of our trademarks, service marks and copyrights both in the United States and in foreign countries. However, our actions may be inadequate to protect our trademarks, copyrights, domain names and other proprietary rights or to prevent others from claiming violations of their trademarks and other proprietary rights. We might not be able to obtain effective trademark, copyright, domain name and trade secret protection in every country in which we distribute our products and services or make them available through the Internet. For instance, it may be difficult for us to enforce our intellectual property rights against third parties who may have inappropriately acquired interests in our intellectual property. It is also difficult and costly for us to police unauthorized use of our proprietary rights and information, particularly in foreign countries. We may not have, in all cases, conducted formal evaluations to confirm that our technology, intellectual property, products and services do not, or will not, infringe upon the intellectual property rights of third parties. As a result, we cannot be certain that our technology, intellectual property, products and services do not, or will not, infringe upon the intellectual property rights of third parties. If we were found to have infringed on a third party’s intellectual property rights, the value of our brands and our business reputation could be impaired, and sales of our products and services could suffer, and we may have to pay damages and, as a result, our stock price could fluctuate or decline.

Although we generally obtain our content and some of our technologies from our employees and through work-for-hire arrangements or purchase, we also license and/or purchase content from third parties. In the license arrangements, we generally obtain representations as to origin and ownership of this content, and the licensors have generally agreed to defend, indemnify and hold us harmless from any third party claims that this content violates the rights of another. However, we cannot be sure that these protections will be effective or sufficient or that we will be able to maintain our content on commercially reasonable terms.

We have licensed in the past, and expect to license in the future, proprietary rights, such as trademarks, brands, content or other copyrighted material, to third parties. While we attempt to ensure that the quality of our content, software and brands are maintained by such licensees, we cannot be sure that such licensees will not take actions that might decrease the value of our trademarks, brands, content or rights or other copyrighted material, which could harm our business, prospects, financial condition, results of operations and cash flows.

In seeking to protect our trademarks, copyrights and other proprietary rights, or defending ourselves against claims of infringement brought by others, with or without merit, we could face costly litigation and the diversion of our management’s attention and resources, which could result in increased expenses and operating losses and, as a result, our stock price could fluctuate or decline.

Intense competition in each of our businesses could reduce our market share, which could result in a decrease in revenue.

The market for Internet-based services is intensely competitive and rapidly changing. The number of online services competing for users’ attention and spending has proliferated. We expect that competition will continue to intensify. We compete for circulation and advertising impressions with media and general interest destination Websites as well as traditional media publications. In addition, our online job board competes with Monster.com and LinkedIn and other job-related sites and services.

In the market for research products and services, numerous other companies and services compete with us both domestically and internationally in providing research and analysis related to a specific industry, technology or geographic area. New competitors may also emerge.

Many of our current and potential competitors have longer operating histories, larger customer bases, greater brand recognition and significantly greater financial, marketing and other resources than we have. These competitors might be able to respond more quickly to new or emerging technologies and changes in customer requirements and to devote greater resources to the development, promotion and sale of their products and services than we can. As a result, we could lose market share to our competitors in one or more of our businesses and our revenues could decline.

If we fail to maintain an effective trade show team, education department and direct sales force, our revenues could decline significantly.

We depend primarily on our event personnel to organize trade shows, our education department to design and coordinate course offerings and our direct sales force to sell advertising on our Websites. This dependence involves a number of risks, including:

	●	the need to increase the size of our trade show personnel, education department and direct sales force;

	●	the need to hire, retain, integrate and motivate trade show, education and sales personnel;

	●	lack of experience or effectiveness of trade show, education and sales personnel; and

	●	competition from other companies in hiring and retaining personnel.

Our revenues could decline if we fail to maintain an effective trade show team, education department and direct sales force and, as a result, our stock price could fluctuate or decline.

We might not be able to attract and retain qualified personnel, which could impact the quality of our content and services and the effectiveness and efficiency of our management, resulting in increased costs and losses in revenue.

Our success also depends on our ability to attract and retain qualified technical, sales and marketing, customer support, financial and accounting, legal and other managerial personnel. The competition for personnel in the industries in which we operate is intense. Our personnel may terminate their employment at any time for any reason. Loss of personnel would also result in increased costs for replacement hiring and training. If we fail to attract new personnel or retain and motivate our current personnel, we might not be able to operate our businesses effectively or efficiently, serve our customers properly or maintain the quality of our content and services.

We face potential liability for information that we publish or distribute, which could spur costly litigation against us.

Due to the nature of content published on our Websites, including content placed on our Websites by others, and as a publisher and distributor of original information and research, we face potential liability based on a variety of theories, including defamation, negligence, copyright or trademark infringement or other legal theories based on the nature, publication or distribution of this information. Such claims could also include, among others, claims that by providing links to Websites operated by third parties, we are liable for wrongful actions by those third parties through these Websites. It is also possible that users could make claims against us for losses incurred in reliance on information provided on our Websites. Such claims, whether brought in the United States or abroad, could divert management time and attention and result in significant cost to investigate and defend, regardless of the merit of these claims. In addition, if we become subject to these types of claims and are not successful in our defense, we might have to pay substantial damages. Our insurance might not adequately protect us against these claims. The filing of these claims could also damage our reputation as a high-quality provider of unbiased, timely information and result in client and user cancellations or overall decreased demand for our products and services.

Our stock price could continue to be extremely volatile, making an investment in our common stock less predictable and more risky, and could spur costly litigation against us.

The market price of our common stock has fluctuated in the past and is likely to continue to be highly volatile. For example, the market price of our common stock has ranged from $0.20 per share to $72.25 per share since our initial public offering in June 1999. The stock market has experienced extreme price and volume fluctuations, and the market prices of securities of Internet-related companies, have been highly volatile. In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted against such a company. Such litigation could result in substantial costs and divert our management’s attention and resources.

We might not be able to remain listed on The NASDAQ Stock Market, and our stock could become “penny stock.”

In September 2011, we received a notice from The NASDAQ Stock Market indicating that we no longer complied with the continued listing requirement that our shares of common stock maintain a minimum closing bid price of $1.00. If the Company does not regain compliance prior to the expiration of the 180-day grace period, NASDAQ will provide written notice that the Company’s common stock is subject to delisting. Alternatively, the Company may transfer its listing to The NASDAQ Capital Market, provided that it satisfies the requirements for continued listing on The NASDAQ Capital Market. If our shares of common stock do not meet the minimum closing bid price of $1.00 by the specified deadline and we do not transfer our listing to The NASDAQ Capital Market, or if we do not meet other continued listing requirements of NASDAQ, our common stock may be delisted, in which case our stock could be “penny stock.”

Penny stock, as defined by the Penny Stock Reform Act, is any equity security not traded on a national securities exchange or quoted on any market of the NASDAQ Stock Market that has a market price of less than $5.00 per share. The penny stock regulations generally require that a disclosure schedule explaining the penny stock market and the risks associated therewith be delivered to purchasers of penny stocks and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors. The broker-dealer must make a suitability determination for each purchaser and receive the purchaser’s written agreement prior to the sale. In addition, the broker-dealer must make certain mandated disclosures, including the actual sale or purchase price and actual bid offer quotations, as well as the compensation to be received by the broker-dealer and certain associated persons. The regulations applicable to penny stocks might severely affect the market liquidity for your common stock and could limit your ability to sell your securities in the secondary market.

Because our stock ownership is heavily concentrated with Alan M. Meckler, our Chairman and CEO, Mr. Meckler will be able to influence matters requiring stockholder approval.

As of March 15, 2012, Alan M. Meckler beneficially owned 39% of our outstanding common stock. As a result of his beneficial ownership, Mr. Meckler, acting alone or with others, is able to influence matters requiring stockholder approval, including the election of directors and approval of significant transactions. This concentration of ownership might delay or prevent a change in control of our company that some investors might deem to be in the best interests of the stockholders.

Our charter documents and the Delaware General Corporation Law might inhibit a takeover, even if such takeover would be beneficial to our stockholders.

Our Amended and Restated Certificate of Incorporation, bylaws and the Delaware General Corporation Law could make it more difficult for a third party to acquire us, even if a change in control would be beneficial to our stockholders. Our Amended and Restated Certificate of Incorporation allows our board of directors to issue preferred stock with rights and preferences that are superior to those of our common stock, which could deter a potential acquiror. Our bylaws provide that a special meeting of stockholders may only be called by our Board, Chairman of the Board, Chief Executive Officer or President or at the request of the holders of a majority of the outstanding shares of our common stock, which could deter a potential acquiror or delay a vote on a potentially beneficial change in control transaction until the annual meeting of stockholders.

Risks Related to the Information Technology and Internet Industries

A lack of continued growth in the use of information technology and the Internet could inhibit the growth of our business.

Our market is rapidly evolving. If information technology or Internet usage does not continue to grow or declines, the use of our networks could decrease or fail to increase and the growth of our business could decline. Information technology and Internet usage may be inhibited for a number of reasons, including:

	●	inadequate network infrastructure;

	●	security or privacy concerns;

	●	inconsistent quality of service;

	●	lack of availability of cost-effective and high-speed service; and

	●	changes in government regulation and other law.

If information technology and Internet usage grows, the Internet infrastructure might not be able to support the demands placed on it by this growth or its performance and reliability may decline. In addition, future outages and other interruptions occurring throughout the Internet could lead to decreased use of our networks and would therefore harm our business and could cause our stock price to fluctuate or decline.

If we are unable to adapt to the rapidly changing Internet advertising environment, we may be unable to attract advertisers to our networks and our revenues could suffer.

The Internet is a relatively new advertising medium, and advertisers that have historically relied upon traditional advertising media may be reluctant to advertise on the Internet. In addition, advertisers that have already invested substantial resources in other advertising methods may be reluctant to adopt a new strategy. Moreover, filtering software programs that limit or prevent advertising from being delivered to an Internet user’s computer are now more effective and widely available. Widespread adoption of this filtering software by Internet users could impair the commercial viability of Internet advertising. Our business would suffer a decrease in revenues if the market for Internet advertising fails to recover from its recent downturn or develops more slowly than expected.

In addition, several pricing models have emerged for selling advertising on the Internet. A majority of our advertising is sold on a cost-per-impression basis in which we are paid for advertising impressions that we display. If we do not effectively price our advertising sales, or do not have enough visitors to our Websites to sustain advertising, our results of operations could suffer.

Legal uncertainties could add additional costs and risks to doing business on the Internet, which would cause an increase in the costs and risks associated with operating our business.

Legal standards relating to the validity, enforceability and scope of protection of proprietary rights in Internet-related businesses and digital rights are still evolving. As a result, we cannot assure the future viability or value of our proprietary rights. We might not have taken adequate steps to prevent the misappropriation or infringement of our intellectual property or other rights. Any such infringement or misappropriation, should it occur, might decrease the value of our intellectual property or other rights and undermine our competitive advantage with respect to such property, resulting in impairment of our business, results of operations and financial condition. In addition, we may have to file lawsuits in the future to perfect or enforce our intellectual property rights or other rights, to protect our trade secrets or to determine the validity and scope of the proprietary rights of others. These lawsuits could result in substantial costs and divert our resources and the attention of our management, which could reduce our earnings and cause our stock price to fluctuate or decline.

Regulation could reduce the value of our domain names.

We own registrations for the Internet domain names WebMediaBrands.com, Mediabistro.com, InsideNetwork.com, Appdata.com and AllFacebook.com, as well as numerous other domain names both in the United States and internationally. Domain names generally are regulated by Internet regulatory bodies. The regulation of domain names in the United States and in foreign countries is subject to change. Regulatory bodies could establish additional top-level domains, appoint additional domain name registrars or modify the requirements for holding domain names. As a result, we might not acquire or maintain our domain names, or comparable domain names, in all the countries in which we conduct business. Because our domain names are important assets that increase our value and contribute to our competitive advantage through name recognition, reputation, user and search engine traffic, a failure to acquire or maintain such domain names in certain countries could inhibit our growth. Furthermore, the relationship between regulations governing domain names and laws protecting trademarks and similar proprietary rights is still evolving. Therefore, we might be unable to maintain domain names or prevent third parties from acquiring domain names that infringe or otherwise decrease the value of our trademarks and other proprietary rights. Any impairment in the value of these important assets could cause our stock price to fluctuate or decline.

Changes in laws and standards relating to data collection and use practices and the privacy of Internet users and other individuals could impair our efforts to advertise our products and services and thereby decrease our revenue.

We collect information from our customers that register to purchase products or services or respond to surveys. With our customers’ permission, we may use this information to inform our customers of products and services that may be of interest to them. We may also share this information with our advertising clients if our customers have granted us permission to do so. The U.S. federal and various state governments have recently adopted or proposed limitations on the collection, distribution and use of personal information of Internet users. The European Union adopted a directive that limits our collection and use of information from Internet users in Europe. In addition, public concern about privacy and the collection, distribution and use of personal information has led to self-regulation of these practices by the Internet advertising and direct marketing industry and to increased federal and state regulation. Since many of the proposed laws, regulations and practices are still being developed, we cannot yet determine the impact these issues may have on our business. Changes to laws or regulations, or industry practices, including consumer privacy laws, could lead to additional costs and could impair our ability to collect customer information which helps us to provide more targeted advertising for our customers, thereby impairing our ability to maximize advertising revenue from our advertising clients.

Taxation of online commerce could result in a decrease in sales and an increase in compliance costs, either of which could cause our stock price to decline.

Tax authorities in a number of states, as well as a Congressional advisory commission, are currently reviewing the appropriate tax treatment of companies engaged in online commerce, and new state tax regulations might subject us to additional state sales and other taxes. If one or more local, state or foreign jurisdictions impose sales tax collection obligations on us, our sales into such state or jurisdiction might decrease because the effective cost of purchasing goods from us increases for those residing in these states or jurisdictions. We might incur significant financial and organizational burdens in order to set up the infrastructure required to comply with applicable tax regulations.

The information technology and Internet industries are characterized by rapid technological change, which could require frequent and costly technological improvements and, if we fail to continually improve our content offerings and services, we could cease to be competitive.

Rapid technological developments, evolving industry standards and user demands, and frequent new product introductions and enhancements characterize the market for Internet products and services. These market characteristics are exacerbated by the emerging nature of the market and the fact that many companies are expected to introduce new Internet products and services in the near future. Our future success and competitive edge will depend on our ability to continually improve our content offerings and services. In addition, the widespread adoption of developing multimedia-enabling technologies could require fundamental and costly changes in our technology and could fundamentally affect the nature, viability and measurability of Internet-based advertising, which could harm our advertising revenues.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

None

ITEM 2.

PROPERTIES

The following table sets forth a list of our current office locations as of December 31, 2011:

Locations	Square Feet	Termination Date	Use
Leased and Occupied
Norwalk, CT	6,600	October 2013	Administrative and IT
New York, NY	18,750	May 2013	Sales, editorial and IT
San Francisco, CA	1,014	December 2012	Editorial, research, and IT

We believe that the general condition of our leased real estate is good and that our facilities are suitable for the purposes for which they are being used. We believe that our current facilities will be adequate to meet our needs for the foreseeable future.

ITEM 3.

LEGAL PROCEEDINGS

None

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock began trading publicly on the Nasdaq Stock Market on June 25, 1999, under the symbol “INTM”. In September 2002, effective with the change in the name of the company to Jupitermedia Corporation, our ticker symbol was changed to “JUPM”. In February 2009, effective with the change in the name of the company to WebMediaBrands, our ticker symbol was changed from “JUPM” to “WEBM.” The following table sets forth for the periods indicated the high and low sale prices of our common stock.

	High		Low
Year ended December 31, 2010
First Quarter	$	1.47	$	0.82
Second Quarter	$	1.21	$	0.85
Third Quarter	$	0.92	$	0.62
Fourth Quarter	$	1.97	$	0.65

Year ended December 31, 2011
First Quarter	$	1.95	$	1.11
Second Quarter	$	1.89	$	1.16
Third Quarter	$	1.38	$	0.59
Fourth Quarter	$	0.76	$	0.36

Year ending December 31, 2012
First Quarter (through March 15, 2012)	$	1.40	$	0.42

As of March 15, 2012, there were 61 holders of record of our common stock, although we believe that the number of beneficial owners of our common stock is substantially higher.

DIVIDEND POLICY

We have never declared or paid a cash dividend and do not anticipate doing so in the foreseeable future. We expect to retain earnings to finance the expansion and development of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon our financial condition, results of operations and capital requirements.

RECENT PURCHASES OF SECURITIES

From inception through December 31, 2011, we have repurchased 835,000 shares of our common stock pursuant to publicly announced repurchase plans as follows:

Date	Total # of shares purchased	Average price paid per share
September 2002	65,000	$1.63
October 2011	770,000	$0.51

EQUITY COMPENSATION PLAN INFORMATION

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted- average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders	6,994,169	$	0.92	1,454,144
Equity compensation plans not approved by security holders	—		—	—
Total	6,994,169	$	0.92	1,454,144

ITEM 6.

SELECTED FINANCIAL DATA

As a “smaller reporting company” under Item 10 of Regulation S-K, we are not required to provide the information under this item.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

●

mediabistro.com, a blog network providing content, education, community resources and career resources about major media industry verticals including new media, social media, Facebook, TV news, advertising, public relations, publishing, design and mobile that includes the following:

10,000Words	AllTwitter	FishbowlLA	MediaJobsDaily	TVNewser
AgencySpy	eBookNewser	FishbowlNY	PRNewser	TVSpy
AllFacebook	FishbowlDC	GalleyCat	SocialTimes	UnBeige

		Our mediabistro.com business also includes an industry-leading job board for media and business professionals focusing on job categories such as social media, new media, publishing, public relations/marketing, advertising, sales, design, web development, television and more;

	●	InsideNetwork.com, a network of online properties dedicated to providing original market research, data services, news, events and job listings on the Facebook platform, on social gaming and on mobile applications ecosystems that includes the following:

		AppData	Inside Mobile Apps	Inside Virtual Goods
		Inside Facebook	Inside Social Games	The Facebook Marketing Bible

	●	SemanticWeb.com, a blog providing content, education, community resources and career resources on the commercialization and application of Semantic Technologies, Linked Data and Big Data.

	●	Community, membership and e-commerce offerings including a freelance listing service, a marketplace for designing and purchasing logos (stocklogos.com) and premium membership services.

Our education business features online and in-person courses and online conferences, including our Social Media Marketing Boot Camps for media and creative professionals. Online education conferences are large-scale programs that offer attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, daily forum discussions within an online classroom, homework assignments, and small group interaction where students receive one-on-one guidance and instruction from an advisor.

Our trade shows include, among others, the Semantic Tech and Business Conference, Inside Social Apps, Social Gaming Summit and AllFacebook Marketing Expo.

Our online business also includes AllCreativeWorld.com, a network of online properties providing content, education, community, career and other resources for creative and design professionals.

We generate our revenues from:

	●	fees charged for online job postings;

	●	advertising on our Websites and e-mail newsletters;

	●	attendee registration fees for our online and in-person courses and conferences;

	●	attendee registration fees to our trade shows;

	●	fees for social media-related market research and data services products;

	●	exhibition space fees and vendor sponsorships to our trade shows; and

	●	subscription sales for our paid membership services.

Customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which, together with fluctuations in online job postings, directly affect our business. Our results will also be impacted by the number and type of education courses offered and by the number and size of trade shows we hold in each quarter. In addition, there may be fluctuations as trade shows held in one period in the current year may be held in a different period in future years.

The principal costs of our business relate to: payroll and benefits costs for our personnel; technology related costs; facilities and equipment; and venue, speaker and advertising expenses for our trade shows and courses.

Acquisition

On May 11, 2011, we acquired all of the shares of Inside Network, Inc. (“Inside Network”) for $7.5 million in cash plus an aggregate of 4,183,130 newly issued shares of our common stock to the stockholders of Inside Network.

Results of Operations

Revenues

Revenues were $12.4 million for the year ended December 31, 2011 and $9.0 million for the year ended December 31, 2010, representing an increase of 38%. This change was primarily due to the acquisition of Inside Network along with continued organic growth of online job postings, advertising revenues, trade show revenues and education revenues. The acquisition of Inside Network contributed $1.5 million to our revenues during the year ended December 31, 2011, primarily from research and advertising. Research revenue relates to Inside Network’s original market research and data services including Appdata, Inside Virtual Goods and the Facebook Marketing Bible.

The organic growth in online job postings was mainly due to an improving economy and the growth in advertising revenues was primarily due to the growth in both page views and in the number of unique visitors to our Websites, specifically on AllFacebook.com and SocialTimes.com. We also ran our Semantic Tech and Business conferences for the first time during 2011, which contributed to the increase in trade show revenues. In addition, the increase in education revenue was primarily due to the introduction of our online conferences, which included our Social Media Marketing Boot Camps.

The following table sets forth, for the periods indicated, a year-over-year comparison of our revenues by components (dollars in thousands):

	Year Ended December 31,				2011 vs. 2010
	2011		2010		$		%
Online job postings	$	4,263	$	3,605	$	658	18	%
Advertising		2,339		1,432		907	63
Education		2,000		1,692		308	18
Trade shows		1,849		1,387		462	33
Other		1,016		871		145	17
Research		962		—		962	100
Total	$	12,429	$	8,987	$	3,442	38	%

Cost of revenues

Cost of revenues primarily consists of payroll and benefits costs for technology and editorial personnel, freelance costs, communications infrastructure and trade show and education operations. Cost of revenues excludes depreciation and amortization. Cost of revenues was $7.2 million for the year ended December 31, 2011 and $5.8 million for the year ended December 31, 2010, representing an increase of 24%. This increase was partially due to the acquisition of Inside Network, which added $567,000 to cost of revenues during the year ended December 31, 2011, including $87,000 in stock-based compensation. The remaining increase was primarily due to increases in trade show costs of $415,000, mainly due to the Semantic Tech and Business conferences, as well as increases in employee-related costs of $180,000 and in editorial freelance costs of $111,000 as we continued to expand our development of blog content, including in the areas of social media, social networks, social gaming and virtual goods.

We intend to make investments through internal development and, where appropriate opportunities arise, to continue to expand our content offerings. We might need to increase our spending in order to create additional content related to new topics or offerings.

Advertising, promotion and selling

Advertising, promotion and selling expenses primarily consist of payroll and benefit costs for sales and marketing personnel, sales commissions and promotion costs. Advertising, promotion and selling expenses were $2.1 million for the year ended December 31, 2011 and $1.8 million for the year ended December 31, 2010, representing an increase of 14%. This increase was primarily due to the acquisition of Inside Network, which added $196,000 to advertising, promotion and selling expenses during the year ended December 31, 2011.

General and administrative

General and administrative expenses consist primarily of payroll and benefits costs for administrative personnel, office-related costs and professional fees. General and administrative expenses were $5.5 million for the year ended December 31, 2011 and $5.6 million for the year ended December 31, 2010, representing a decrease of 2%. This decrease was due primarily to a decrease in employee-related costs and capital taxes, which was partially offset by an increase in stock-based compensation of $622,000. Stock-based compensation included $460,000 in non-cash expense related to the issuance of a fully vested option to purchase 1,000,000 shares of common stock to our Chief Executive Office, Alan M. Meckler. See Related Party Transactions below for further information.

Depreciation and amortization

Depreciation expense was $319,000 and $438,000 for the years ended December 31, 2011 and 2010, respectively, representing a decrease of 27%. This decrease was due primarily to a decrease in capital expenditures.

Amortization expense was $513,000 and $191,000 for the years ended December 31, 2011 and 2010, respectively, representing an increase of 169%. This increase was due primarily to the finalization of the purchase price allocation of the Semantic Tech and Business Conference and SemanticUniverse blog and the acquisition of Inside Network.

Our depreciation and amortization expenses might vary in future periods based upon a change in our capital expenditure levels or any future acquisitions.

Impairment

During the year ended December 31, 2011, in conjunction with our annual impairment test, we identified indicators that our goodwill was impaired. These indicators included a decline in our stock price. As a result, for the year ended December 31, 2011, we recorded a non-cash impairment charge of $8.3 million to reduce the carrying amount of goodwill to fair value.

Other loss, net

Other loss was $9,000 during the year ended December 31, 2011 and was primarily related to foreign currency transaction losses. Other loss of $73,000 during the year ended December 31, 2010 was due primarily to the loss on the sale of our building and land in Peoria, Illinois, partially offset by the gain on sale of an investment in a portfolio company of one of our former venture funds that was previously impaired along with net foreign currency transaction gains. See note 9 to the consolidated financial statements included in Item 8 of this Form 10-K for additional disclosures related to the sale of this property.

Interest income and interest expense

The following table sets forth, for the periods indicated, a year-over-year comparison of our interest income and interest expense (dollars in thousands):

	Year Ended December 31,						2011 vs. 2010
	2011			2010			$			%
Interest income	$	86		$	244		$	(158	)	(65	)%
Interest expense	$	(657	)	$	(808	)	$	151		19

Interest expense during the years ended December 31, 2011 and 2010 relates primarily to costs associated with our loans from a related party. See Related Party Transactions below for a description of the loans. The decrease in interest income is primarily due to a lower cash carrying value during the year ended December 31, 2011.

Benefit for income taxes

We recorded an income tax benefit of $403,000 and $749,000 during the years ended December 31, 2011 and 2010, respectively. During the year ended December 31, 2011, the income tax benefit consisted primarily of a $444,000 income tax benefit, which was due to the release of valuation allowance against deferred income tax assets as a result of additional deferred income tax liabilities that we recorded as part of our acquisition of Inside Network. This income tax benefit was partially offset by $34,000 of additional income tax expense for tax amortization on indefinite lived assets and $7,000 of additional income tax expense for uncertain tax positions. During the year ended December 31, 2010, the income tax benefit consisted primarily of a $769,000 income tax benefit for the reduction in deferred income tax liabilities, which was primarily due to the sale of our building and land in Peoria, Illinois. This income tax benefit was partially offset by $20,000 of additional income tax expense for uncertain tax positions.

Based on current projections, management believes that it is more likely than not that we will have insufficient taxable income to allow recognition of its deferred tax assets. Accordingly, we established a valuation allowance against deferred income tax assets to the extent that deductible temporary differences cannot be offset by taxable temporary differences. To the extent that the net book value of indefinite lived assets exceeds the net tax value of indefinite lived assets, an additional tax provision will be incurred as the assets are amortized.

The total amount of unrecognized tax benefits was $85,000 as of December 31, 2011 and 2010, all of which would affect the effective tax rate, if recognized, as of December 31, 2011.

At December 31, 2011, we had deferred income tax assets associated with federal and state net operating loss (“NOL”) carryforwards of $25.9 million. Realization of the deferred tax assets is dependent on generating sufficient taxable income in future years. We have established an additional valuation allowance of $1.4 million against the deferred income tax assets attributable to NOL carryforwards during 2011.

Liquidity and Capital Resources

The following table sets forth, for the periods indicated, a year-over-year comparison of the key components of our liquidity and capital resources (dollars in thousands):

							2011 vs. 2010
For the Year Ended December 31:	2011			2010			$			%
Operating cash flows	$	(1,843	)	$	(3,825	)	$	1,982		52	%
Investing cash flows	$	(9,119	)	$	1,731		$	(10,850	)	(627	)%
Financing cash flows	$	1,430		$	47		$	1,383		2,943	%

As of December 31:
Cash and cash equivalents	$	3,438		$	12,970		$	(9,532	)	(73	)%
Working capital	$	1,794		$	10,565		$	(8,771	)	(83	)%
Loan from related party	$	7,647		$	5,947		$	1,700		29	%

Since inception, we have funded operations through various means, including public offerings of our common stock, the sales of our Events, Research, Online images and Internet.com businesses, credit agreements and cash flows from operating activities.

Operating activities. Cash used in operating activities decreased during 2011 compared to 2010 due primarily to reduced losses from continuing operations.

Investing activities. The amounts of cash used in investing activities vary in correlation to the number and cost of the acquisitions consummated. Net cash used in investing activities during 2011 related primarily to the acquisition of Inside Network. Net cash provided by investing activities during 2010 related primarily to net proceeds from the sale of our Peoria, Illinois building and land along with the anniversary payment from the sale of our Internet.com business.

Financing activities. Cash provided by financing activities during 2011 relates primarily to our borrowings from a related party partially offset by the purchase of common stock pursuant to our repurchase plan. Cash provided by financing activities during 2010 related primarily to stock option exercises offset by repayments of borrowings to a related party.

We expect to continue our investing activities on a limited basis for the foreseeable future, which includes the potential to strategically acquire companies and content that are complementary to our business. We expect to finance any near-term acquisitions with cash on hand.

Our existing cash balances might decline during 2012 in the event of a downturn in the economy or changes in our planned cash outlay. However, we believe the remaining cash flow together with our existing cash balances, our current business plan and our current revenue prospects will be sufficient to meet the working capital and operating requirements of our business for at least the next 12 months.

Off-Balance Sheet Arrangements

We have not entered into off-balance sheet arrangements or issued guarantees to third parties.

Related Party Transactions

On May 29, 2009, we entered into a loan agreement in the amount of $7.2 million with our Chief Executive Officer, Alan M. Meckler (the “2009 Meckler Loan”).

In conjunction with the 2009 Meckler Loan, we (1) entered into a promissory note jointly and severally payable by us and our subsidiary, Mediabistro, to Mr. Meckler (the “2009 Note”), (2) entered into a Security Agreement with Mr. Meckler (the “Security Agreement”) pursuant to which we granted to Mr. Meckler a security interest in the our assets, (3) entered into an Intellectual Property Security Agreement with Mr. Meckler (the “IP Security Agreement”) pursuant to which the we granted to Mr. Meckler a security interest in the our intellectual property, (4) entered into a Pledge Agreement by us in favor of Mr. Meckler (the “Pledge Agreement”) pursuant to which we granted to Mr. Meckler a security interest in and an assignment of all of the shares of stock or other equity interest of Mediabistro owned by us, and (5) agreed to enter into a Blocked Account Control Agreement with Mr. Meckler and a depositary bank, to further secure the Note (the “Control Agreement,” and together with the 2009 Note, the Security Agreement, the IP Security Agreement and the Pledge Agreement, the “Company Loan Documents”).

Simultaneously, Mediabistro (1) entered into a Security Agreement with Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s assets (the “Mediabistro Security Agreement”), (2) entered into an Intellectual Property Security Agreement with Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s intellectual property (the “Mediabistro IP Security Agreement”), and (3) agreed to enter into a Blocked Account Control Agreement with Mr. Meckler and a depositary bank, to further secure the 2009 Note (the “Mediabistro Control Agreement” and, together with the Mediabistro Security Agreement and the Mediabistro IP Security Agreement, the “Mediabistro Documents”).

To fund the 2009 Meckler Loan, Mr. Meckler used a portion of the proceeds of a residential mortgage loan that Bank of America, N.A. (“BOA”) granted to Mr. Meckler and Mrs. Ellen L. Meckler (the “BOA Loan”). Pursuant to a Collateral Assignment of the 2009 Note dated May 29, 2009, by Mr. Meckler to BOA, Mr. Meckler collaterally assigned the Note to BOA as additional collateral for the BOA Loan. Payment terms of the 2009 Meckler Loan reflect pass through of the BOA Loan payment terms (excluding those funds borrowed pursuant to the BOA Loan for Mr. Meckler’s personal use). As a result, the interest rate, amortization schedule and maturity date of each loan are identical.

The original principal amount of the 2009 Meckler Loan equaled the amount required to pay off and terminate an interest rate swap agreement between us and KeyBank and related transactional expenses. On September 1, 2010, we entered into a note modification agreement with Mr. Meckler. The Note Modification Agreement reduced the interest rate of the Note from 4.7% to 3.4% per annum. Interest on the outstanding principal amount is due and payable on the first day of each calendar month through June 2014. Thereafter, principal and interest is due and payable in equal monthly payments in an amount sufficient to pay the loan in full based on an amortization term of 15 years. In addition to the interest rate reduction noted above, the note modification agreement also reduced the required minimum monthly principal and interest payments that commence on July 1, 2014. Although there are no future minimum principal payments due under the 2009 Meckler Loan for the years ended December 31, 2011 through December 31, 2013, we had repaid approximately $1.3 million of the 2009 Meckler Loan as of December 31, 2011. The 2009 Note is due and payable in full on May 29, 2016, and may be prepaid at any time without penalty or premium. We made one principal payment in the amount of $50,000 during the year ended December 31, 2011 and three principal payments on the 2009 Meckler Loan totaling $250,000 during the year ended December 31, 2010.

On November 14, 2011, we along with Mediabistro, entered into a 2nd Note Modification Agreement with Mr. Meckler. The 2nd Note Modification Agreement amends the 2009 Note, which is described above. Under the 2nd Note Modification Agreement, the parties agreed to terminate our obligation to make a monthly accommodation fee of $40,000 to Mr. Meckler. As a result, the 2nd Note Modification Agreement reduces the effective interest payable on the 2009 Meckler Loan by $480,000 per year. We granted Mr. Meckler a fully vested stock option to purchase 1,000,000 shares of our common stock pursuant to the terms of the 2008 WebMediaBrands Stock Option Plan. All other terms of the 2009 Meckler Loan remain unchanged.

Also on November 14, 2011, we, along with our wholly owned subsidiaries, Mediabistro and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, Mediabistro and Inside Network to Mr. Meckler (the “2011 Note”); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “WEBM Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets; (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “2nd IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property; and (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “2nd Pledge Agreement”), and together with the 2011 Note, the WEBM Security Agreement and the 2nd IP Security Agreement, the “2011 Company Loan Documents”) pursuant to which the Company granted to Mr. Meckler a security interest in and assignment of all of the shares of stock or other equity interest of Mediabistro and Inside Network owned by the Company.

In the 2011 Note, Mr. Meckler loaned us $1,750,000 (the “2011 Meckler Loan”). The interest rate of the 2011 Note is 3.10% per annum. Interest on the outstanding principal amount is due and payable monthly until August 2014. Thereafter, principal and interest is due and payable in equal monthly installments, with the outstanding principal amount, together with all accrued interest thereon, due and payable on August 18, 2016. The 2011 Note may be prepaid at any time without penalty or premium.

In partial consideration of the 2011 Note and the 2nd Note Modification Agreement, Inside Network entered into a Security Agreement by and between Inside Network and Mr. Meckler pursuant to which Inside Network granted to Mr. Meckler a security interest in Inside Network’s assets (the “Inside Network Security Agreement”) to secure Inside Network’s obligations under the 2011 Note and the 2009 Note.

The 2011 Company Loan Documents and Inside Network Security Agreement contain customary terms for a loan transaction of this type. In an Event of Default (as defined in the 2011 Note) occurs and is continuing beyond a specified cure period, Mr. Meckler may declare the 2011 Meckler Loan immediately due and payable. The 2011 Meckler Loan also will become immediately due and payable upon certain events of bankruptcy or insolvency or in the event of a Change of Control (as defined in the 2011 Note) of Mediabistro, Inside Network, or the Company.

Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $624,000 and $781,000 during the years ended December 31, 2011 and 2010, respectively. There are no future minimum principal payments due under the 2009 Meckler Loan and the 2011 Meckler Loan for the years ended December 31, 2012 and 2013. There are future minimum principal payments due to Mr. Meckler for the 2009 Meckler Loan and the 2011 Meckler Loan in the amount of $189,000 for the year ended December 31, 2014; $419,000 for the year ended December 31, 2015; and $7.0 million for the year ended December 31, 2016.

Recent Accounting Pronouncements

We are required to adopt certain new accounting pronouncements. See note 2 to the consolidated financial statements included in Item 8 of this Form 10-K.

Critical Accounting Estimates

Our significant accounting policies are described in note 2 to the consolidated financial statements included in Item 8 of this Form 10-K.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the revenues and expenses reported during the period. Following are accounting policies that we believe are most important to the portrayal of our financial condition and results of operations and that require our most difficult judgments as a result of the need to make estimates and assumptions about the effects of matters that are inherently uncertain. Management has discussed these critical accounting estimates with our Audit Committee.

Impairment of Goodwill and Indefinite Lived Intangible Assets. We evaluate the carrying value of our goodwill and indefinite lived intangible assets annually in the fourth quarter and whenever events or circumstances make it more likely than not that an impairment may have occurred. We test goodwill and other intangible assets for impairment in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles – Goodwill and Other”, and all other long-lived assets for impairment in accordance with ASC Topic 360, “Property, Plant, and Equipment.” Long-lived assets, including goodwill and intangible assets, were $18.2 million and $12.5 million as of December 31, 2011 and 2010, respectively.

ASC Topic 350 prescribes a two-step method for determining goodwill impairment. In the first step, we compare the estimated fair value of each reporting unit to its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds the estimated fair value, we complete step two to determine the amount of the impairment loss. Step two requires the allocation of the estimated fair value of the reporting unit to the assets, including any unrecognized intangible assets, and liabilities in a hypothetical purchase price allocation. Any remaining unallocated fair value represents the implied fair value of goodwill, which we compare to the corresponding carrying value of goodwill to compute the goodwill impairment amount.

The determination of reporting unit fair value is a matter of significant judgment and we employ, as appropriate, three different methodologies to make this determination. The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows, discount rates, and the allocation of shared or corporate items. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. In the similar transactions method, consideration is given to prices paid in recent transactions that have occurred in the reporting unit’s industry or in related industries. Our business operates as one reporting unit.

As part of the 2011 and 2010 impairment analysis, we determined the fair value of our business using the income approach and the market approach.

The determination of the fair value of the reporting unit and the allocation of that value to individual assets and liabilities within the reporting unit requires management to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies; control premiums appropriate for acquisitions in the industries in which we compete; the discount rate; terminal growth rates; and forecasts of net sales, operating income, depreciation and amortization and capital expenditures. The allocation requires several analyses to determine the fair value of assets and liabilities including, among others, trade names, customer relationships and property, plant and equipment. Although we believe our estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting unit, the amount of the goodwill impairment charge, or both. We also compared the sum of the estimated fair values of the reporting unit to our total enterprise value as implied by the market value of our equity. This comparison indicated that, in total, our assumptions and estimates were not unreasonable. However, future declines in the overall market value of our equity might indicate that the fair value of the reporting unit has declined below its carrying value.

Determining whether an impairment of indefinite lived intangible assets has occurred requires an analysis of the fair value of each of the related domain names. The significant estimates and assumptions used by management in assessing the recoverability of long-lived assets are estimated future cash flows, weighted average cost of capital, currently enacted tax laws, as well as other factors. Any changes in these estimates or assumptions could result in an impairment charge. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s subjective judgment. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluations of long-lived assets can vary within a range of outcomes.

In addition to the testing described above, which we do on an annual basis, management evaluates whether the carrying value of its long-lived assets may not be recoverable, considering, among other things, any (i) current-period operating or cash flow declines combined with a history of operating or cash flow declines or a projection/forecast that demonstrates continuing declines in the cash flow of an entity or inability of an entity to improve its operations to forecasted levels and (ii) significant adverse change in the business climate, whether structural or technological, that could affect the value of an entity.

The annual impairment test is considered critical because of the significance of goodwill and indefinite lived intangible assets to our consolidated balance sheet. We have applied what we believe to be the most appropriate valuation methodology for our reporting unit.

Impairment of Long-Lived Assets . We test all other long-lived assets (amortized intangible assets, such as customer relationships and property, plant and equipment) for impairment, in accordance with ASC Topic 350 and ASC Topic 360 at the asset level associated with the lowest level of cash flows. An impairment exists if the carrying value of the asset is (i) not recoverable (the carrying value of the asset is greater than the sum of undiscounted cash flows) and (ii) is greater than its fair value.

The significant estimates and assumptions used by management in assessing the recoverability of long-lived assets include estimated future cash flows, weighted average cost of capital and currently enacted tax laws. Any changes in these estimates or assumptions could result in an impairment charge. The estimates of future cash flows, based on reasonable and supportable assumptions and projections, require management’s subjective judgment. Depending on the assumptions and estimates used, the estimated future cash flows projected in the evaluations of long-lived assets can vary within a range of outcomes.

The annual impairment test is considered critical because of the significance of long-lived assets to our consolidated balance sheet. We have applied what we believe to be the most appropriate valuation methodology for our reporting unit.

Stock-based Compensation. Effective January 1, 2006, we adopted ASC Topic 718, “Compensation-Stock Compensation.” Among its provisions, ASC Topic 718 requires us to recognize compensation expense for equity awards over the vesting period based on the award’s grant-date fair value. The intrinsic value of options exercised during the years ended December 31, 2011 and 2010 was $568,000 and $637,000, respectively.

Historically, we offered stock option awards as our primary form of long-term incentive compensation. These stock option awards generally vest over three years and have a five or ten year term. We use the Black-Scholes option valuation model to value stock option awards. The fair value of stock option awards is based on the fair value of our stock on the date of grant. In 2011, we issued restricted stock awards as incentive compensation to certain employees in conjunction with the acquisition of Inside Network. The fair value of the restricted stock award is based on the closing price of our stock on the date of grant. These shares vest over four years.

The Black-Scholes valuation model for our stock option awards estimates the potential value the employee will receive based on current interest rates, the expected time at which the employee will exercise the award and the expected volatility of our stock price. These assumptions are based on historical experience and future expectations of employee behavior and stock price.

Another significant assumption we utilize in calculating our stock-based compensation is the amount of awards that we expect to forfeit. We recognize compensation expense only for share-based payments expected to vest, and we estimate forfeitures, both at the date of grant as well as throughout the vesting period, based on our historical experience and future expectations.

Changes in our assumptions we utilize to value our stock options and forfeiture rates could materially affect the amount of stock-based compensation expense recognized in the consolidated statement of operations.

Income Taxes. We are subject to income taxes in the United States. Significant judgments, estimates and assumptions are required in determining our tax return reporting positions and in calculating our provisions for income taxes, as they are based on our interpretation of tax regulations and accounting pronouncements. The tax bases of our assets and liabilities reflect our best estimate of the tax benefits and costs we expect to realize. We establish valuation allowances to reduce our deferred income tax assets to an amount that will more likely than not be realized. Our net deferred income tax liabilities were $444,000 and $410,000 as of December 31, 2011 and 2010, respectively. A significant portion of our deferred income taxes consist of NOLs. We have NOLs totaling $140.6 million at December 31, 2011, which are available to reduce future taxes in the United States. The NOLs expire at various times between 2012 and 2030.

Significant management judgment is required in determining our income tax provision and in evaluating our tax position. We evaluate our uncertain tax positions using a two-step approach in accordance with the accounting pronouncement related to income taxes. Recognition, the first step, occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. Measurement, the second step, determines the amount of benefit that more-likely-than-not will be realized upon settlement. Reversal of a tax position that was previously recognized would occur when an enterprise subsequently determines that a tax position no longer meets the more-likely-than-not threshold of being sustained. Our net income tax benefit was $403,000 and $749,000 for the years ended December 31, 2011 and 2010, respectively. A change in our uncertain tax positions could have a significant impact on our results of operations. Historically, the difference between our estimates and actual results has not been material.

Allowance for Doubtful Accounts. We estimate our allowance for doubtful accounts based on historical losses as a percentage of revenue, existing economic conditions, and specific account analysis of at-risk customers. Historical losses and existing economic conditions may not be indicative of future losses, and the impact of economic conditions on each of our customers is difficult to estimate. Should future uncollectible amounts not reflect our current estimates, we would be required to charge off our uncollectible accounts through an entry to bad debt expense included in general and administrative expense in our consolidated statement of operations. Our allowances for doubtful accounts at December 31, 2011 and 2010 were $11,000 and $10,000, respectively. Historically, the difference between our estimates and actual results has not been material.

ITEM 7A.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a “smaller reporting company” under Item 10 of Regulation S-K, we are not required to provide the information under this item.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

WebMediaBrands Inc.

Index to Consolidated Financial Statements

	Page
Report of Independent Registered Public Accounting Firm	24

Consolidated Balance Sheets as of December 31, 2011 and 2010	25

Consolidated Statements of Operations for the Years Ended December 31, 2011 and 2010	26

Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2011 and 2010	27

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011 and 2010	28

Notes to Consolidated Financial Statements	29

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

WebMediaBrands Inc.

We have audited the accompanying consolidated balance sheets of WebMediaBrands Inc. and Subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2011. 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall 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 financial position of WebMediaBrands Inc. and Subsidiaries as of December 31, 2011 and 2010 and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011, in conformity with U.S. generally accepted accounting principles.

/s/ Rothstein Kass

Roseland, New Jersey

March 21, 2012

WebMediaBrands Inc.

Consolidated Balance Sheets

December 31, 2011 and 2010

(in thousands, except share and per share amounts)

	December 31, 2011			December 31, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	3,438		$	12,970
Accounts receivable, net of allowances of $11 and $10, respectively		489			581
Prepaid expenses and other current assets		575			912
Total current assets		4,502			14,463
Property and equipment, net		477			728
Intangible assets, net		2,626			1,535
Goodwill		15,116			10,261
Investments and other assets		1,146			1,005
Total assets	$	23,867		$	27,992

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	367		$	1,210
Accrued payroll and related expenses		391			424
Accrued expenses and other current liabilities		662			1,447
Deferred revenues		1,288			817
Total current liabilities		2,708			3,898
Loan from related party		7,647			5,947
Deferred revenues		22			19
Deferred income taxes		444			410
Other long-term liabilities		60			57
Total liabilities		10,881			10,331
Commitments and contingencies (see note 13)
Stockholders’ equity:
Preferred stock, $.01 par value, 4,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $.01 par value, 75,000,000 shares authorized, 42,545,702 and 37,986,851 shares issued and 41,710,702 and 37,921,851 shares outstanding at December 31, 2011 and 2010, respectively		425			380
Additional paid-in capital		288,672			281,087
Accumulated deficit		(275,615	)		(263,700	)
Treasury stock, 835,000 and 65,000 shares, at cost at December 31, 2011 and 2010, respectively		(496	)		(106	)
Total stockholders’ equity		12,986			17,661
Total liabilities and stockholders’ equity	$	23,867		$	27,992

See notes to consolidated financial statements.

WebMediaBrands Inc.

Consolidated Statements of Operations

For the Years Ended December 31, 2011 and 2010

(in thousands, except per share data)

	Year Ended December 31,
	2011			2010
Revenues	$	12,429		$	8,987
Cost of revenues		7,154			5,787
Advertising, promotion and selling		2,088			1,828
General and administrative		5,475			5,578
Depreciation		319			438
Amortization		513			191
Impairment		8,289			319
Contingent acquisition consideration		329			—
Total operating expenses		24,167			14,141
Operating loss from continuing operations		(11,738	)		(5,154	)
Other loss, net		(9	)		(73	)
Interest income		86			244
Interest expense		(657	)		(808	)
Loss from continuing operations before income taxes		(12,318	)		(5,791	)
Benefit for income taxes		(403	)		(749	)
Loss from continuing operations		(11,915	)		(5,042	)
Income from discontinued operations, net of tax		—			6
Gain on sale of discontinued operations		—			2,016
Net loss	$	(11,915	)	$	(3,020	)
Income (loss) per share:
Basic
Loss from continuing operations	$	(0.29	)	$	(0.13	)
Income from discontinued operations		—			0.05
Net loss	$	(0.29	)	$	(0.08	)
Diluted
Loss from continuing operations	$	(0.29	)	$	(0.13	)
Income from discontinued operations		—			0.05
Net loss	$	(0.29	)	$	(0.08	)
Weighted average shares used in computing income (loss) per share:
Basic		40,730			37,518
Diluted		40,730			37,518

See notes to consolidated financial statements.

WebMediaBrands Inc.

Consolidated Statements of Changes in Stockholders’ Equity

For the Years Ended December 31, 2011 and 2010

(in thousands, except share amounts)

	Common Stock				Additional Paid-In Capital		Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity			Total Comprehensive Income (Loss)
	Shares		Amount
Balance at January 1, 2010		37,060,723	$	371	$	280,556	$	(260,680	)	$	(106	)	$	27		$	20,168		$
Exercise of stock options		926,128		9		297		—			—			—			306			—
Stock-based compensation, net of forfeitures		—		—		211		—			—			—			211			—
Consultant options		—		—		23		—			—			—			23			—
Foreign currency translation adjustment		—		—		—		—			—			(14	)		(14	)		(14	)
Reclassification adjustment for loss included in net loss related to foreign currency translation		—		—		—		—			—			(13	)		(13	)		(13	)
Net loss		—		—		—		(3,020	)		—			—			(3,020	)		(3,020	)
Balance at December 31, 2010		37,986,851		380		281,087		(263,700	)		(106	)		—			17,661		$	(3,047	)
Exercise of stock options		488,954		5		141		—			—			—			146			—
Stock-based compensation, net of forfeitures		187,642		2		989		—			—			—			991			—
Consultant options		—		—		10		—			—			—			10			—
Shares issued in connection with the acquisition of Inside Network		3,882,255		38		6,445		—			—			—			6,483			—
Purchase of treasury stock		—		—		—		—			(390	)		—			(390	)		—
Net loss		—		—		—		(11,915	)		—			—			(11,915	)	$	(11,915	)
Balance at December 31, 2011		42,545,702	$	425	$	288,672	$	(275,615	)	$	(496	)	$	—		$	12,986		$	(11,915	)

See notes to consolidated financial statements.

WebMediaBrands Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2011 and 2010

(in thousands)

	Year Ended December 31,
	2011			2010
Cash flows from operating activities:
Net loss	$	(11,915	)	$	(3,020	)
Less: Income from discontinued operations, net of tax		—			6
Less: Gain on sale of discontinued operations		—			2,016
Loss from continuing operations		(11,915	)		(5,042	)
Adjustments to reconcile net loss to net cash used in operating activities:
Impairment		8,289			319
Depreciation and amortization		832			629
Stock-based compensation		991			211
Provision for losses on accounts receivable		15			—
Other, net		(2	)		154
Amortization of debt issuance costs		28			61
Deferred income taxes		(410	)		(769	)
Changes in current assets and liabilities (net of businesses acquired):
Accounts receivable, net		135			(80	)
Prepaid expenses and other assets		660			1,961
Accounts payable, accrued expenses and other liabilities		(702	)		(1,079	)
Deferred revenues		236			(211	)
Discontinued operations		—			21
Net cash used in operating activities		(1,843	)		(3,825	)
Cash flows from investing activities:
Purchases of property and equipment		(57	)		(78	)
Acquisitions of businesses, assets and other		(9,062	)		(1,437	)
Proceeds from sale of discontinued operations, net		—			1,700
Proceeds from sale of assets		—			1,546
Net cash provided by (used in) investing activities		(9,119	)		1,731
Cash flows from financing activities:
Borrowings from related party		1,750			—
Purchase of treasury stock		(390	)		—
Debt issuance costs		(26	)		(9	)
Repayment of borrowings from related party		(50	)		(250	)
Proceeds from exercise of stock options		146			306
Net cash provided by financing activities		1,430			47
Effect of exchange rates on cash		—			5
Net decrease in cash and cash equivalents		(9,532	)		(2,042	)
Cash and cash equivalents, beginning of year		12,970			15,012
Cash and cash equivalents, end of year	$	3,438		$	12,970
Supplemental disclosure of cash flow:
Cash refund of income taxes	$	393		$	2,080
Cash paid for interest	$	629		$	785
Non-cash investing activities:
Acquisitions of long-lived assets	$	9		$	17

The following schedule represents cash paid, common stock issued and liabilities assumed for the acquisition of Inside Network, Inc. (see note 3):

Fair value of assets acquired	$	15,162		$	-
Cash paid		(7,455	)		-
Common stock issued		(6,483	)		-
Total liabilities assumed	$	1,224		$	-

See notes to consolidated financial statements.

WebMediaBrands Inc.

Notes to Consolidated Financial Statements

For the Years Ended December 31, 2011 and 2010

1. THE COMPANY

WebMediaBrands Inc. (“WebMediaBrands” or the “Company”) is an Internet media company that provides content, education and career services to social media, traditional media and creative professionals through a portfolio of vertical online properties, communities and trade shows. The Company’s online business includes:

●

10,000Words	eBookNewser	GalleyCat	TVNewser
AgencySpy	FishbowlDC	MediaJobsDaily	TVSpy
AllFacebook	FishbowlLA	PRNewser	UnBeige
AllTwitter	FishbowlNY	SocialTimes

		The mediabistro.com business also includes an industry-leading job board for media and creative professionals focusing on job categories such as social media, new media, publishing, public relations/marketing, advertising, sales, design, web development, television and more;

	●	InsideNetwork.com, a network of online properties dedicated to providing original market research, data services, news, events and job listings on the Facebook platform, on social gaming and on mobile applications ecosystems that includes the following:

		AppData	Inside Mobile Apps	Inside Virtual Goods
		Inside Facebook	Inside Social Games	The Facebook Marketing Bible

●

SemanticWeb.com, a blog providing content, education, community resources and career resources on the commercialization and application of Semantic Technologies, Linked Data and Big Data.

●

Community, membership and e-commerce offerings including a freelance listing service, a marketplace for designing and purchasing logos, (stocklogos.com) and premium membership services.

The Company’s education business features online and in-person courses and online conferences for media and creative professionals. Online education conferences are large-scale offerings that offer attendees the opportunity to learn in a dynamic online setting with live weekly instruction via webcast, daily forum discussions within an online classroom, homework assignments, and small group interaction where students receive one-on-one guidance and instruction from an advisor.

The Company’s trade shows include, among others, the Semantic Tech and Business Conference, Inside Social Apps, Social Gaming Summit and AllFacebook Marketing Expo.

The Company’s online business also includes AllCreativeWorld.com, a network of online properties providing content, education, community, career and other resources for creative and design professionals.

2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation. The consolidated financial statements include the accounts of WebMediaBrands and its wholly-owned subsidiaries: Mediabistro Inc., a Delaware corporation; and Inside Network, Inc., a California corporation. All significant intercompany balances and transactions have been eliminated in consolidation.

Reclassifications. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Revenue recognition. WebMediaBrands generates its revenues from the following primary sources:

Online job boards. WebMediaBrands generates fees charged for online job postings on mediabistro.com. WebMediaBrands recognizes revenue ratably in the period in which the job postings are displayed.

Online advertising revenues. WebMediaBrands recognizes advertising revenue ratably in the period in which the advertising is displayed, provided that all contracted advertising impressions have been delivered and collection of the resulting receivable is probable. WebMediaBrands typically sells its advertising based on the delivery of a minimum number of advertising impressions.

Online and in-person courses and conferences. WebMediaBrands offers online and in-person courses and online conferences for media and creative professionals. WebMediaBrands generates revenues from attendee registrations and recognizes revenue ratably as classes and online conferences are held.

Trade shows. WebMediaBrands produces trade shows and conferences on topics covered by the Company’s online business. WebMediaBrands generates revenues from attendee registrations, the purchase of exhibition space by exhibitors who pay a fixed price per square foot of booth space, and advertiser and vendor sponsorships. WebMediaBrands recognizes revenue from trade shows in the period in which the trade show is held.

Paid research and membership subscription services. Paid research services relate to subscriptions to social media market research and data services products, which the Company sells through Inside Network, Inc. and includes AppData, Inside Virtual Goods and The Facebook Marketing Bible. Paid membership services relate to subscriptions to online services, Freelance Marketplace and AvantGuild, which the Company sells through Mediabistro.com. WebMediaBrands recognizes revenue from subscriptions ratably over the subscription period.

Use of estimates in the financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in WebMediaBrands’s consolidated financial statements. Actual results could differ from those estimates.

Concentration of credit risk. Financial instruments that potentially subject WebMediaBrands to concentration of credit risk consist primarily of cash and accounts receivable. In general, WebMediaBrands invests its excess cash in savings and business money market accounts. WebMediaBrands’s cash balances are in excess of federal depository insurance limitations. WebMediaBrands has not experienced any losses on its deposits of cash and cash equivalents. WebMediaBrands’s concentration of credit risk with respect to accounts receivable is limited due to its large number of customers and their dispersion across many geographic areas. No single customer represented 10% or more of its total revenue or accounts receivable in any of the periods presented.

Cash and cash equivalents. WebMediaBrands considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. At December 31, 2011 and 2010, WebMediaBrands had no investments with maturities greater than three months.

Financial instruments. The carrying amounts of financial instruments such as cash and cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short-term maturities. WebMediaBrands pays a fixed interest rate of 3.4% and 3.1% on its long-term debt with its Chief Executive Officer Alan M. Meckler. See note 10 for information regarding this related party transaction.

Fair value measurements. Certain assets and liabilities of WebMediaBrands are required to be recorded at fair value. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants. The fair value of cash and cash equivalents, accounts receivable, debt and accounts payable approximate their carrying values. The Company also has other assets or liabilities that it records at the fair value, such as its long-lived assets held and used, long-lived assets held for sale, goodwill and other intangible assets. The three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies, is as follows:

	Level 1	Valuations based on quoted prices for identical assets and liabilities in active markets.

	Level 2	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.

	Level 3	Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants.

Allowance for doubtful accounts. WebMediaBrands estimates its allowance for doubtful accounts based on historical losses as a percentage of revenue, existing economic conditions, and specific account analysis of at-risk customers. Historical losses and existing economic conditions might not be indicative of future losses, and the impact of economic conditions on each of its customers is difficult to estimate. Should future uncollectible amounts exceed its current estimates, WebMediaBrands would be required to charge off its uncollectible accounts through an entry to bad debt expense included in general and administrative expense in its consolidated statement of operations.

Property and equipment. The Company records property and equipment at cost or their estimated fair value at the date of acquisition if acquired during a business combination, and depreciates them over their estimated useful lives. The Company depreciates computer equipment and software by the straight-line method over estimated useful lives of three years. The Company depreciates furniture, fixtures and equipment by the straight-line method over estimated useful lives ranging from five to ten years. The Company amortizes leasehold improvements over the shorter of their useful lives or the lease term. Amortization of leasehold improvements is included in depreciation expense.

Goodwill and other intangible assets. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, “Intangibles – Goodwill and Other”, goodwill and other intangible assets with indefinite useful lives are not amortized, but are reviewed periodically for impairment.

The provisions of ASC Topic 350 require that an intangible asset that is not subject to amortization be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. WebMediaBrands evaluates goodwill on a separate reporting unit basis in the fourth quarter each year. The provisions also require that a two-step test be performed to assess goodwill for impairment. First, the Company compares the fair value of each reporting unit to its carrying value, including goodwill. If the fair value exceeds the carrying value then goodwill is not impaired and no further testing is performed. If the carrying value of a reporting unit exceeds its fair value, the Company performs the second step of the goodwill impairment test to measure the amount of impairment loss, if any. The second step compares the fair value of the reporting unit’s goodwill with the carrying amount of the goodwill. The Company would recognize an impairment loss in an amount equal to the excess of the carrying amount of goodwill over the fair value of the goodwill. See note 6 for additional information.

The significant estimates and assumptions management uses in assessing the recoverability of goodwill and other intangible assets are estimated future cash flows, present value discount rate and other factors. Any changes in these estimates or assumptions could result in an impairment charge. The estimates of future cash flows, while based on reasonable and supportable assumptions and projections, require management’s subjective judgment.

In addition to the testing above, which the Company does on an annual basis, management uses certain indicators to evaluate whether the carrying value of goodwill and other intangible assets may not be recoverable, including among others (i) current-period operating or cash flow declines combined with a history of operating or cash flow declines or a projection/forecast that demonstrates continuing declines in the cash flow of an entity or inability of an entity to improve its operations to forecasted levels and (ii) a significant adverse change in the business climate, whether structural or technological, that could affect the value of an entity.

ASC Topic 350 also requires that intangible assets with definite lives be amortized over their estimated useful life and reviewed for impairment.

Impairment of long-lived assets. The Company reviews long-lived assets and certain identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset might not be recoverable. The Company recognizes an impairment loss when the sum of undiscounted expected future cash flows is less than the carrying amount of such assets. The measurement for such impairment loss is based on estimated fair values. Fair values have been determined based upon estimated future cash flows.

Equity method for accounting for investments. WebMediaBrands accounts for investments in accordance with ASC Topic 323, “Investments – Equity Method and Joint Ventures.” Investments in companies in which the Company has a 20% to 50% interest are carried at cost, adjusted for the Company’s proportional share of their undistributed earnings or losses. The Company reviews these investments whenever events or changes in circumstances indicate that the carrying amount of these investments may not be recoverable. As of December 31, 2011, WebMediaBrands had a 33% investment in SMT Social.Media.Tracking GmbH (“SMT”), which began operations on February 11, 2011, and WebMediaBrands accounts for this investment under the equity method. The value of this investment as of December 31, 2011 and 2010 was $341,000 and $0, respectively, and is included in investments and other assets in the Company’s consolidated balance sheets. SMT had net assets of $188,000 as of December 31, 2011 and a net loss of $10,000 for the period from inception through December 31, 2011. There is no market for the common stock of the investments, and accordingly, no quoted market price is available.

Advertising and promotion expense. WebMediaBrands expenses advertising and promotion costs as incurred. Advertising and promotion expense was $229,000 and $193,000 for the years ended December 31, 2011 and 2010, respectively.

Income taxes. WebMediaBrands accounts for income taxes in accordance ASC Topic 740, “Income Taxes”, which requires an asset and liability approach to financial reporting for incomes taxes. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using presently enacted statutory tax rates. The Company recognizes the effect on deferred income tax assets and liabilities of changes in tax rates in income in the period that includes the enactment date. ASC Topic 740 also requires that deferred income tax assets be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

The Company is required to determine whether its tax positions are more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company measures tax benefit recognized as the largest amount of benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. De-recognition of a tax benefit previously recognized results in the Company recording a tax liability that reduces retained earnings. WebMediaBrands recognizes penalties and tax-related interest expense as a component of income tax expense in the Company’s consolidated statements of operations. See note 12 for additional disclosure related to income taxes.

Self-insurance. WebMediaBrands is self-insured for its health and welfare costs. The Company's liability for health and welfare claims includes an estimate for claims incurred but not yet reported and is limited by the Company's stop loss policy. This liability is included in accrued payroll and related expenses on the consolidated balance sheets for the years ended December 31, 2011 and 2010.

Stock-based compensation. WebMediaBrands follows ASC Topic 718, “Compensation-Stock Compensation.” Among its provisions, the Topic requires WebMediaBrands to recognize compensation expense for equity awards over the vesting period based on their grant-date fair value. WebMediaBrands’s policy is to grant stock options and restricted stock awards with an exercise price equal to or greater than the fair value on the date of grant. WebMediaBrands amortizes stock-based compensation expense on a straight-line basis over the vesting term.

The Company recognizes compensation expense only for stock-based awards expected to vest. WebMediaBrands estimates forfeitures at the date of grant based on WebMediaBrands’s historical experience and future expectations.

Recent accounting pronouncements. In May 2011, the FASB issued Accounting Standards Update ("ASU") No. 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS". The amendments in ASU No. 2011-04 generally represent clarification of Topic No. 820, but also include instances where a particular principle or requirement for measuring fair value or disclosing information about fair value measurements has changed. ASU No. 2011-04 results in common principles and requirements for measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and International Financial Reporting Standards. The amendments are effective for interim and annual periods beginning after December 15, 2011 and are to be applied prospectively. Early application is not permitted. The Company does not expect that the adoption of ASU No. 2011-04 will have a material impact on its consolidated financial statements.

In September 2011, the FASB issued ASU No. 2011-08: “Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment.” The objective of ASU 2011-08 is to simplify how entities test goodwill for impairment. The amendments permit an entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is defined as having a likelihood of more than 50 percent. ASU No. 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. Early adoption is permitted, including for annual and interim goodwill impairment tests performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent annual or interim period have not yet been issued. The Company has elected early adoption of ASU No. 2011-08 and does not expect that it will have a material impact on its consolidated financial statements.

3. ACQUISITIONS

On May 11, 2011, WebMediaBrands entered into a stock purchase agreement with the stockholders of Inside Network, Inc. ("Inside Network") and Justin Smith as the Stockholder Representative, pursuant to which the Company purchased all of the outstanding shares of capital stock of Inside Network for an aggregate purchase price comprised of $7.5 million in cash plus an aggregate of 4,183,130 newly issued shares of the Company's common stock.

Of the 4,183,130 shares of the Company's common stock issued as part of the purchase price for Inside Network's capital stock, the Company issued an aggregate of 3,882,255 unregistered shares of the Company's common stock to Eric Eldon and Justin Smith. These shares are subject to registration rights that required the Company to file for registration of these shares with the Securities and Exchange Commission. In connection with the indemnification obligations of Inside Network's stockholders under the stock purchase agreement, a portion of the purchase price the Company paid is subject to an escrow agreement.

Of the 4,183,130 shares of the Company's common stock issued as part of the purchase price for Inside Network's capital stock, 300,875 shares were subject to restricted stock purchase agreements by and between the Company and each of five Inside Network stockholders who were also employees of Inside Network at the time of the acquisition. The shares subject to the restricted stock purchase agreements were issued under the Company's 2008 Stock Incentive Plan and are subject to vesting. Each restricted stock purchase agreement includes customary representations, warranties and covenants and customary indemnification obligations.

The Company allocated the total purchase price to the assets and liabilities based on their respective fair values. The following table summarizes the final purchase price allocation of the acquisition of Inside Network (in thousands):

Cash and cash equivalents	$	661
Accounts receivable		58
Prepaid expenses and other current assets		3
Income taxes receivable		122
Website development costs		230
Customer relationships		430
Copyrights and trademarks		480
Goodwill		13,178
Total assets acquired		15,162
Accounts payable		25
Accrued payroll and related expenses		271
Accrued expenses		247
Deferred revenue		237
Deferred income taxes		444
Total liabilities assumed		1,224
Net assets acquired	$	13,938

Intangible assets and goodwill include the final allocation of the purchase price relating to the acquisition of Inside Network. The intangible assets subject to amortization are being amortized on a straight-line basis over periods ranging from five to seven years. The goodwill associated with the acquisition of Inside Network is not deductible for tax purposes.

The acquisition of Inside Network strengthens WebMediaBrands’s position in covering the Facebook, social gaming and mobile applications ecosystems. The acquisition of Inside Network further diversifies the Company’s revenue sources since a significant percentage of Inside Network’s revenue is generated from market research and data services. WebMediaBrands believes that the acquisition of Inside Network will augment its editorial coverage of social media, its online education offerings and its online job board presence in the social media space. These factors led the Company to allocate a significant portion of the purchase price of Inside Network to goodwill.

Unaudited pro forma information below presents results of operations as if the acquisition of Inside Network had occurred on the first day of the periods presented. The unaudited pro forma information is not necessarily indicative of the results of operations for the combined companies had these events occurred at the beginning of the periods presented, nor is it indicative of future results (in thousands, except per share amounts):

	Year Ended December 31,
	2011			2010
Revenues	$	13,425		$	10,584
Net loss	$	(11,843	)	$	(2,572	)
Basic and diluted loss per share	$	(0.02	)	$	(0.06	)

WebMediaBrands also made one acquisition in the amount of $1.1 million during the year ended December 31, 2010.

4. COMPUTATION OF INCOME (LOSS) PER SHARE

Basic income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Dilutive income (loss) per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares that may be issued upon the exercise of stock options. Common equivalent shares are excluded from the calculation if their effect is anti-dilutive.

Computations of basic and diluted income (loss) per share for the years ended December 31, 2011 and 2010 are as follows (in thousands, except per share amounts):

	Year Ended December 31,
	2011			2010
Loss from continuing operations	$	(11,915	)	$	(5,042	)
Income from discontinued operations, net of tax		—			6
Gain on sale of discontinued operations		—			2,016
Net loss	$	(11,915	)	$	(3,020	)

Basic weighted average common shares outstanding		40,730			37,518
Effect of dilutive stock options		—			—
Total basic weighted average common shares and dilutive stock options		40,730			37,518

Income (loss) per share:
Basic
Loss from continuing operations	$	(0.29	)	$	(0.13	)
Income from discontinued operations		—			0.05
Net loss	$	(0.29	)	$	(0.08	)
Diluted
Loss from continuing operations	$	(0.29	)	$	(0.13	)
Income from discontinued operations		—			0.05
Net loss	$	(0.29	)	$	(0.08	)

The following table summarizes the number of outstanding stock options excluded from the calculation of diluted loss per share for the periods presented because the result would have been anti-dilutive (in thousands, except weighted average exercise price):

	Year Ended December 31,
	2011		2010
Number of anti-dilutive stock options		6,994		5,174
Weighted average exercise price	$	0.92	$	1.02

5. PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in thousands):

	December 31,
	2011			2010
Computer equipment and software	$	664		$	905
Furniture, fixtures and equipment		238			418
Leasehold improvements		925			961
Total		1,827			2,284
Less: Accumulated depreciation		(1,350	)		(1,556	)
Property and equipment, net	$	477		$	728

6. INTANGIBLE ASSETS AND GOODWILL

Amortized Intangible Assets

The following table sets forth the intangible assets that are subject to amortization, including the related accumulated amortization (in thousands):

	December 31, 2011
	Cost		Accumulated Amortization			Net Carrying Value
Customer relationships	$	804	$	(239	)	$	565
Copyrights and trademarks		534		(79	)		455
Website development costs		567		(174	)		393
Content development costs		165		(142	)		23
Non-compete agreements		109		(88	)		21
Total	$	2,179	$	(722	)	$	1,457

	December 31, 2010
	Cost		Accumulated Amortization			Net Carrying Value
Customer relationships	$	187	$	(62	)	$	125
Copyrights and trademarks		39		(7	)		32
Website development costs		238		(36	)		202
Content development costs		160		(77	)		83
Non-compete agreements		53		(27	)		26
Total	$	677	$	(209	)	$	468

The Company amortizes intangible assets that are subject to amortization on a straight-line basis over their expected useful lives. The Company amortizes website development costs, copyrights and trademarks, and customer relationships over three to seven years and content development costs over a two-year period. The Company amortizes non-compete agreements over the period of the agreements, typically from one to three years. Estimated amortization expense for intangible assets subject to amortization is as follows (in thousands):

Year Ending December 31:
2012	$	511
2013		313
2014		223
2015		203
2016		121
Thereafter		86
	$	1,457

Unamortized Intangible Assets and Goodwill

During the year ended December 31, 2011, in conjunction with WebMediaBrands’s annual impairment test, the Company identified indicators that its goodwill was impaired. These indicators included a decline in its stock price. As a result, the Company recorded a non-cash impairment charge of $8.3 million related to the write-down of goodwill. This impairment charge is not tax deductible because the acquisitions that gave rise to most of the carrying value of the Company’s goodwill were structured as stock transactions.

The fair value of goodwill is the residual fair value after allocating the total fair value of a reporting unit to its other assets, net of liabilities. The Company estimated the total fair value of each reporting unit using a combination of a discounted cash flow model (present value of future cash flows) and two market approach models (a multiple of various metrics based on comparable businesses and market transactions).

The following table sets forth the intangible assets that are not subject to amortization (in thousands):

	December 31,
	2011		2010
Domain names	$	1,169	$	1,067

The changes in the carrying amount of goodwill for each of the two years in the period ended December 31, 2011 are as follows (in thousands):

Balance as of January 1, 2010	$	9,495
Goodwill acquired during year		1,125
Purchase accounting adjustments		(359	)
Balance as of December 31, 2010		10,261
Goodwill acquired during year		13,483
Purchase accounting adjustments		(339	)
Impairment		(8,289	)
Balance as of December 31, 2011	$	15,116

Goodwill acquired during the year ended December 31, 2011 primarily relates to the Company’s acquisition of Inside Network. Purchase accounting adjustments during the year ended December 31, 2011 primarily relate to adjustments made in finalizing the purchase price of the Semantic Tech and Business Conference and SemanticUniverse blog.

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):

	December 31,
	2011		2010
Customer overpayments	$	211	$	274
Accrued professional fees		151		103
Accrued property and capital taxes		48		72
Other		252		303
Accrued acquisition contingencies		—		695
Total	$	662	$	1,447

8. SEGMENT INFORMATION

Segment information is presented in accordance with ASC Topic 280, “Segment Reporting”. ASC Topic 280 is typically based on a management approach that designates the internal organization used for making operating decisions and assessing performance. Operating segments are defined as business areas or lines of an enterprise about which financial information is available and evaluated on a regular basis by the chief operating decision-makers, or decision-making groups, in deciding how to allocate capital and other resources to such lines of business. The Company operates in one reportable segment. The Company is affected by seasonality as customers generally post more job listings during the first calendar quarter and fewer job listings during the fourth calendar quarter. Also, advertisers generally place fewer advertisements during the first and third calendar quarters of each year, which together with fluctuations in online job postings, directly affect our business. The Company’s results will also be impacted by the number and type of education courses offered and by the number and size of trade shows held in each quarter. In addition, there may be fluctuations as trade shows held in one period in the current year may be held in a different period in future years.

9. DISPOSITIONS AND DISCONTINUED OPERATIONS

On October 11, 2010, the Company entered into a Purchase and Sale Agreement for its building and land in Peoria, Illinois for $1.8 million. As a result of this agreement, the Company recorded an impairment charge of $319,000 during the year ended December 31, 2010. The impairment charge included a broker commission that was paid upon the closing of the transaction and estimated closing costs. On November 29, 2010, the parties amended the Purchase and Sale Agreement to reduce the purchase price to $1.6 million and eliminate the Company financing. The sale of the property closed on December 3, 2010. Due to the change in terms of the Purchase and Sale Agreement, the Company recorded a loss on the sale of the property of $142,000. This loss is included as a component of other loss, net in the Company’s 2010 consolidated statement of operations.

On November 30, 2009, the Company sold its Internet.com business to Quinstreet Inc. for $18.0 million in cash, subject to a working capital purchase price adjustment (the “Internet.com Sale”). Quinstreet paid $16.0 million of the purchase price at closing. The remaining $2.0 million was to be paid on the first anniversary of the closing. Quinstreet had the right to withhold and deduct from the $2.0 million anniversary payment any sum that the Company owed Quinstreet under the indemnification and working capital adjustment provisions of the asset purchase agreement. In June 2010, the Company finalized the working capital purchase price adjustment related to the Internet.com Sale and recorded a liability of $399,000, of which the Company paid $99,000 during the year ended December 31, 2010. The Company deducted the remaining liability of $300,000 from the final payment owed by Quinstreet to the Company on the first anniversary of the closing. On November 30, 2010, Quinstreet paid to the Company $1.7 million to satisfy the final terms of the agreement. As a result of the Internet.com Sale, WebMediaBrands is accounting for the operations of its Internet.com business as a discontinued operation. The carrying value of the net assets of the Internet.com business at the time of the Internet.com Sale was $12.9 million, and the sale of the Internet.com business resulted in a gain of $1.6 million for the year ended December 31, 2009 and a gain of $2.0 million for the year ended December 31, 2010.

10. DEBT

On May 29, 2009, WebMediaBrands entered into a loan agreement in the amount of $7.2 million with the Company’s Chief Executive Officer, Alan M. Meckler (the “2009 Meckler Loan”).

In conjunction with the 2009 Meckler Loan, the Company (1) entered into a promissory note jointly and severally payable by the Company and its subsidiary, Mediabistro, to Mr. Meckler (the “2009 Note”), (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets, (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property, (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “Pledge Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in and an assignment of all of the shares of stock or other equity interest of Mediabistro owned by the Company, and (5) agreed to enter into a Blocked Account Control Agreement by and among the Company, Mr. Meckler and a depositary bank, to further secure the Note (the “Control Agreement,” and together with the 2009 Note, the Security Agreement, the IP Security Agreement and the Pledge Agreement, the “Company Loan Documents”).

Simultaneously, Mediabistro (1) entered into a Security Agreement by and between Mediabistro and Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s assets (the “Mediabistro Security Agreement”), (2) entered into an Intellectual Property Security Agreement by and between Mediabistro and Mr. Meckler pursuant to which Mediabistro granted to Mr. Meckler a security interest in Mediabistro’s intellectual property (the “Mediabistro IP Security Agreement”), and (3) agreed to enter into a Blocked Account Control Agreement by and among Mediabistro, Mr. Meckler and a depositary bank, to further secure the 2009 Note (the “Mediabistro Control Agreement” and, together with the Mediabistro Security Agreement and the Mediabistro IP Security Agreement, the “Mediabistro Documents”).

The original principal amount of the 2009 Meckler Loan equaled the amount that was required to pay off and terminate an interest rate swap agreement between the Company and KeyBank and related transactional expenses. On September 1, 2010, WebMediaBrands entered into a Note Modification Agreement with Mr. Meckler. The Note Modification Agreement reduced the interest rate of the Note from 4.7% to 3.4% per annum. Interest on the outstanding principal amount is due and payable on the first day of each calendar month through June 2014. Thereafter, principal and interest is due and payable in equal monthly payments in an amount sufficient to pay the loan in full based on an amortization term of 15 years. In addition to the interest rate reduction noted above, the Note Modification Agreement also reduced the required minimum monthly principal and interest payments that commence on July 1, 2014. Although there are no future minimum principal payments due under the 2009 Meckler Loan for the years ended December 31, 2011 through December 31, 2013, the Company had repaid approximately $1.3 million of the 2009 Meckler Loan as of December 31, 2011. The 2009 Note is due and payable in full on May 29, 2016, and may be prepaid at any time without penalty or premium. WebMediaBrands made one principal payment in the amount of $50,000 during the year ended December 31, 2011 and three principal payments on the 2009 Meckler Loan totaling $250,000 during the year ended December 31, 2010.

On November 14, 2011, the Company and Mediabistro entered into a 2nd Note Modification Agreement with Mr. Meckler. The 2nd Note Modification Agreement amends the 2009 Note, which is described above. Under the 2nd Note Modification Agreement, the parties agreed to terminate the Company’s obligation to make a monthly accommodation fee of $40,000 to Mr. Meckler. As a result, the 2nd Note Modification Agreement reduces the effective interest payable on the 2009 Meckler Loan by $480,000 per year. The Company granted Mr. Meckler a fully vested stock option to purchase 1,000,000 shares of the Company’s common stock pursuant to the terms of the 2008 WebMediaBrands Stock Option Plan. All other terms of the 2009 Meckler Loan remain unchanged.

Also on November 14, 2011, WebMediaBrands and its wholly owned subsidiaries, Mediabistro and Inside Network: (1) entered into a promissory note jointly and severally payable by the Company, Mediabistro and Inside Network to Mr. Meckler (the “2011 Note”); (2) entered into a Security Agreement by and between the Company and Mr. Meckler (the “WEBM Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s assets; (3) entered into an Intellectual Property Security Agreement by and between the Company and Mr. Meckler (the “2nd IP Security Agreement”) pursuant to which the Company granted to Mr. Meckler a security interest in the Company’s intellectual property; and (4) entered into a Pledge Agreement by the Company in favor of Mr. Meckler (the “2nd Pledge Agreement”), and together with the 2011 Note, the WEBM Security Agreement and the 2nd IP Security Agreement, the “2011 Company Loan Documents”) pursuant to which the Company granted to Mr. Meckler a security interest in and assignment of all of the shares of stock or other equity interest of Mediabistro and Inside Network owned by the Company.

In the 2011 Note, Mr. Meckler loaned the Company $1,750,000 (the “2011 Meckler Loan”). The interest rate of the 2011 Note is 3.10% per annum. Interest on the outstanding principal amount is due and payable monthly until August 2014. Thereafter, principal and interest is due and payable in equal monthly installments, with the outstanding principal amount, together with all accrued interest thereon, due and payable on August 18, 2016. The 2011 Note may be prepaid at any time without penalty or premium.

The 2011 Company Loan Documents and the Inside Network Security Agreement contain customary terms for a loan transaction of this type. If an Event of Default (as defined in the 2011 Note) occurs and is continuing beyond a specified cure period, Mr. Meckler may declare the 2011 Meckler Loan immediately due and payable. The 2011 Meckler Loan also will become immediately due and payable upon certain events of bankruptcy or insolvency or in the event of a Change of Control (as defined in the 2011 Note) of Mediabistro, Inside Network, or the Company.

Interest expense on the 2009 Meckler Loan and 2011 Meckler Loan was $624,000 and $781,000 during the years ended December 31, 2011 and 2010, respectively. There are no future minimum principal payments due under the 2009 Meckler Loan and the 2011 Meckler Loan for the years ended December 31, 2012 and 2013. There are future minimum payments due to Mr. Meckler for the 2009 Meckler Loan and the 2011 Meckler Loan in the amount of $189,000 for the year ended December 31, 2014; $419,000 for the year ended December 31, 2015; and $7.0 million for the year ended December 31, 2016.

11. STOCKHOLDERS’ EQUITY

WebMediaBrands is authorized to issue up to 4,000,000 shares of preferred stock, $.01 par value. The Board of Directors has the authority, without further vote or action by the stockholders, to issue the undesignated shares of preferred stock in one or more series and to fix all rights, qualifications, preferences, limitations and restrictions of each series, including dividend rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series.

12. INCOME TAXES

WebMediaBrands’s income tax benefit for each of the years presented is determined in accordance with ASC Topic 740, “Income Taxes”.

Loss from continuing operations before income taxes is attributable to the following tax jurisdictions (in thousands):

	Year Ended December 31,
	2011			2010
United States	$	(12,318	)	$	(5,791	)
Foreign		—			—
Loss from continuing operations before taxes	$	(12,318	)	$	(5,791	)

The components of the income tax benefit as shown in the consolidated statements of operations are as follows (in thousands):

	Year Ended December 31,
	2011			2010
Current income tax provision (benefit)
Federal	$	3		$	(40	)
State and local		4			60
Total current income tax provision (benefit)		7			20
Deferred income tax benefit
Federal		(362	)		(674	)
State and local		(48	)		(95	)
Total deferred income tax benefit		(410	)		(769	)
Income tax benefit	$	(403	)	$	(749	)

A summary of WebMediaBrands’s deferred income tax assets and liabilities as of December 31, 2011 and 2010 is as follows (in thousands):

	December 31,
	2011			2010
Deferred income tax assets:
Net operating loss carryforward	$	25,949		$	25,131
Capital loss carryforward		44,579			44,579
Amortization and impairment of goodwill and long-lived assets		823			1,249
Depreciation of property and equipment		176			150
Reserves recorded for financial reporting purposes		23			13
Stock-based compensation		4,564			4,378
Other		969			969
Total deferred income tax assets		77,083			76,469
Less valuation allowance		(77,083	)		(76,469	)
Net deferred income tax assets		—			—
Deferred income tax liabilities:
Amortization of intangible assets		(444	)		(410	)
Total deferred income tax liabilities		(444	)		(410	)
Net deferred income tax liabilities	$	(444	)	$	(410	)

WebMediaBrands recorded an income tax benefit of $403,000 and $749,000 during the years ended December 31, 2011 and 2010 respectively. During the year ended December 31, 2011, the income tax benefit consisted primarily of a $444,000 income tax benefit, which was due to the release of valuation allowance against the Company’s deferred income tax assets as a result of additional deferred income tax liabilities that were recorded as part of the acquisition of Inside Network. This income tax benefit was partially offset by $34,000 of additional tax expense for tax amortization on indefinite lived assets and $7,000 of additional income tax expense for uncertain tax positions. During the year ended December 31, 2010, the income tax benefit consisted primarily of a $769,000 income tax benefit for the reduction in deferred income tax liabilities, which was primarily due to the sale of the Company’s building and land in Peoria, Illinois. This income tax benefit was partially offset by $20,000 of additional income tax expense for uncertain tax positions.

Based on current projections, management believes that it is more likely than not that WebMediaBrands will have insufficient taxable income to allow recognition of its deferred tax assets. Accordingly, a valuation allowance has been established against deferred income tax assets to the extent that deductible temporary differences cannot be offset by taxable temporary differences. To the extent that the net book value of indefinite lived assets exceeds the net tax value of indefinite lived assets, an additional tax provision will be incurred as the assets are amortized for income tax purposes.

At December 31, 2011, WebMediaBrands had deferred income tax assets associated with net operating loss (“NOL”) carryforwards of $25.9 million. Realization of the deferred tax assets is dependent on generating sufficient taxable income in future years. WebMediaBrands established an additional valuation allowance of $1.4 million against the deferred income tax assets attributable to NOL carryforwards during 2011.

WebMediaBrands’s deferred income tax assets at December 31, 2011 with respect to NOLs expire as follows (in thousands):

	Deferred Income Tax Assets		Net Operating Loss Carry Forwards
United States (Federal), expiring between 2024 and 2030	$	21,694	$	63,677
United States (State), expiring between 2012 and 2030		4,255		76,972
Total	$	25,949	$	140,649

Additionally, WebMediaBrands has capital loss carryforwards of $122.0 million, which will expire by 2014. Based on current projections, management believes that it is more likely than not that WebMediaBrands will have insufficient capital gain income to allow recognition of these carryforwards. Accordingly, a valuation allowance has been established against the deferred tax asset.

A reconciliation setting forth the difference between the amount of taxes computed at WebMediaBrands’s effective income tax rate and the U.S. federal statutory income tax rate is as follows (in thousands):

	Year Ended December 31,
	2011			2010
Income tax expense based on federal statutory rate	$	(4,188	)	$	(1,962	)
State and local tax expense, net of U.S. federal income tax		(197	)		(263	)
Change in valuation allowance		614			1,400
Non-deductible expenses		2,874			60
Other		494			16
Total	$	(403	)	$	(749	)

Non-deductible expenses during the year ended December 31, 2011 relate primarily to impairment of non-deductible goodwill.

WebMediaBrands remains open for examination by the Internal Revenue Service (“IRS”) for 2006, 2008 and subsequent years. With limited exceptions, the Company is no longer subject to state and local or non-U.S. income tax audits by taxing authorities for years prior to 2007. In addition, for years prior to 2007 in which NOLs were generated, the tax authorities could adjust the NOL carryovers up to the amount of the NOL carryover.

As of December 31, 2011, the amount of accrued income tax-related interest and penalties included in accrued expenses and other current liabilities and other long-term liabilities was $37,000 and $8,000, respectively. As of December 31, 2010, the amount of accrued income tax-related interest and penalties included in accrued expenses and other current liabilities and other long term liabilities in the consolidated balance sheet was $30,000 and $8,000, respectively.

It is reasonably possible that a reduction in a range up to $130,000 of unrecognized income tax benefits, including income tax-related interest and penalties, may occur within the next 12 months as a result of projected resolutions of worldwide tax disputes and expiration of statute of limitations.

The total amount of unrecognized tax benefits was $85,000 as of December 31, 2011 and December 31, 2010, all of which would affect the effective tax rate, if recognized, as of December 31, 2011.

13. COMMITMENTS AND CONTINGENCIES

WebMediaBrands has entered into operating leases for each of its office facilities. Generally under the lease agreements, WebMediaBrands is obligated to pay a proportionate share of all operating costs for these premises. Rent expense for leased facilities was $780,000 and $762,000 for the years ended December 31, 2011 and 2010, respectively, and was net of sublease income of $267,000 and $108,000 during the years ended December 31, 2011 and 2010, respectively.

Future annual minimum lease payments under all operating leases are as follows (in thousands):

Years Ending December 31,
2012	$	1,043
2013		436
2014		—
2015		—
2016 and thereafter		—
Total minimum payments	$	1,479

There are no minimum rentals to be received in the future under noncancelable subleases as of December 31, 2011.

WebMediaBrands is subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to active legal proceedings will not materially affect the financial statements of WebMediaBrands.

14. EMPLOYEE BENEFIT PLAN

WebMediaBrands has a defined contribution plan, which qualifies under Section 401(k) of the Internal Revenue Code for employees meeting certain service requirements. WebMediaBrands may also make contributions each year for the benefit of all eligible employees under the plan. There were no discretionary contributions to the plan for the years ended December 31, 2011 and 2010.

15. STOCK INCENTIVE PLAN

In April 1999, WebMediaBrands established the WebMediaBrands 1999 Stock Incentive Plan (Amended and Restated as of March 5, 2008) (the “1999 Plan”) under which WebMediaBrands may issue qualified incentive or nonqualified stock options to employees, including officers, consultants and directors. The exercise price of the options granted under the 1999 Plan will not be less than the fair market value of the shares of WebMediaBrands’s common stock on the date of grant. In June 2006, the 1999 Plan was amended to increase the number of shares of WebMediaBrands common stock and options to purchase shares of WebMediaBrands common stock available for issuance thereunder to 12,000,000 shares.

At the Annual Meeting of Stockholders of WebMediaBrands in June 2008, WebMediaBrands’s stockholders approved the WebMediaBrands 2008 Stock Incentive Plan (the “2008 Plan”). The 2008 Plan, along with the form of Incentive Stock Option Agreement and the form of Nonqualified Stock Option Agreement were previously approved and adopted by WebMediaBrands’s Board in April 2008. The Compensation Committee of the Board administers the 2008 Plan, which allows for the grant of incentive stock options, nonqualified stock options, restricted stock, performance-based awards and other stock-based awards.

Subject to antidilution adjustments, 1,454,144 shares of WebMediaBrands common stock may be issued under the 2008 Plan and 6,994,169 shares of common stock underly outstanding awards granted under the 1999 Plan and 2008 Plan as of December 31, 2011. These shares will be available for grants following any expiration, cancellation, forfeiture, cash settlement, or other termination of such awards.

Stock options granted prior to September 2010, have a five-year term. Options issued for the remainder of 2010 and through 2011 have a 10-year term. Stock option grants generally vest equally on each of the first three anniversaries of their respective grant dates. WebMediaBrands issues new shares of common stock upon the exercise of stock options.

The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants during the periods presented:

	Year Ended December 31,
	2011			2010
Risk-free interest rate		1.16	%		1.04	%
Expected life (in years)		5.61			3.78
Dividend yield		0	%		0	%
Expected volatility		96	%		109	%

The expected stock price volatility is based on the historical volatility of WebMediaBrands’s common stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. As discussed above, WebMediaBrands had previously issued stock options with a five-year life. The Company calculated the expected term for these stock options using historical data. However, during the third quarter of 2010, the Company began issuing stock options with a 10-year life and as a result, the Company calculated the expected term using the simplified method.

The weighted-average grant date fair value of options granted during the years ended December, 31 2011 and 2010 was $0.57 for both years. The total intrinsic value of options exercised during the years ended December 31, 2011 and 2010, was $568,000 and $637,000, respectively.

The following table summarizes nonvested option activity for the year ended December 31, 2011:

	Shares			Weighted Average Exercise Price
Outstanding nonvested shares at December 31, 2010		1,947,747		$	0.78
Granted		2,628,737		$	0.76
Vested		(1,729,884	)	$	0.70
Forfeited		(254,987	)	$	1.04
Outstanding nonvested shares at December 31, 2011		2,591,613		$	0.78

The following table summarizes option activity during the year ended December 31, 2011:

	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2010	5,173,911		$	1.00
Granted	2,628,737		$	0.76
Exercised	(488,954	)	$	0.30
Forfeited or expired	(319,525	)	$	1.83
Outstanding at December 31, 2010	6,994,169		$	0.92	5.96	$	290
Vested and expected to vest at December 31, 2011	6,672,995		$	0.93	5.79	$	290
Exercisable at December 31, 2011	4,402,856		$	1.01	4.42	$	290

The aggregate intrinsic value in the table above is before income taxes, based on WebMediaBrands’s closing stock price of $0.48 as of December 30, 2011.

The following table summarizes restricted stock activity during the year ended December 31, 2011:

	Shares			Weighted Average Grant Date Fair Value
Outstanding nonvested shares at December 31, 2010		—		$	—
Granted		300,875		$	1.67
Vested		(54,997	)	$	1.67
Forfeited		(113,233	)	$	1.67
Outstanding nonvested shares at December 31, 2011		132,645		$	1.67

Total employee stock-based compensation is as follows (in thousands):

	Year ended December 31,
	2011		2010
Stock options for employees	$	886	$	211
Restricted stock for employees		105		—
Total employee stock based compensation	$	991	$	211

Stock-based compensation increased additional paid-in capital by $991,000 during the year ended December 31, 2011. WebMediaBrands received $146,000 and $306,000 from the exercise of stock options during the years ended December 31, 2011 and 2010, respectively. As of December 31, 2011, there was $1.5 million of total unrecognized compensation costs related to nonvested stock-based compensation. The company expects to amortize these costs over a weighted-average period of 19 months.

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. The Company conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (“Exchange Act”) under the supervision and with the participation of its management including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Disclosure controls and procedures are designed only to provide reasonable assurance 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 period specified in the SEC rules and forms and (ii) information is accumulated and communicated to management as appropriate to allow timely decisions regarding required disclosures.

As a result of this evaluation, the CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to provide the reasonable assurance discussed above.

Management’s Report on Internal Control over Financial Reporting. Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A control system, no matter how well conceived and operated, can provide only reasonable assurance that the objectives of the control system are met. Management applied its judgment in assessing the benefits of controls relative to their cost. Because of the inherent limitations in control systems, no evaluation of controls can provide absolute assurance that all controls issues and instances of fraud, if any, within the Company have been detected. Because of its inherent limitations, internal control over financial reporting might not prevent or detect misstatements. Also, projections of any evaluation of the effectiveness of internal control over financial reporting to future periods are subject to the risk that controls might become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures might deteriorate. The Company’s management, with the participation of the CEO and CFO, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011. Based on the Company’s evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2011 based on criteria in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the year ended December 31, 2011 that have materially affected, or are reasonably likely to affect, our internal control over financial reporting.

ITEM 9B.

OTHER INFORMATION

None

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS OF THE REGISTRANT