Actua (ACTA) 10-Q 2008 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For Quarterly Period Ended March 31, 2008

Commission File Number 001-16249

INTERNET CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State of other jurisdiction of
incorporation or organization) 23-2996071
(I.R.S. Employer
Identification Number)

690 Lee Road, Suite 310, Wayne, PA
(Address of principal executive offices) 19087
(Zip Code)

(610) 727-6900
(Registrant’s telephone number, including area code)

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

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

Large accelerated filer o	Accelerated filer þ	Non-accelerated filer o	Smaller reporting company o
	(Do not check if a smaller reporting company)

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

The number of shares of the Company’s Common Stock, $0.001 par value per share outstanding as of April 30, 2008 was 38,704,419 shares.

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

INDEX

ITEM		PAGE NO.
	PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets — March 31, 2008 (unaudited) and December 31, 2007		6
	Consolidated Statements of Operations (unaudited) — Three Months Ended March 31, 2008 and 2007		7
	Consolidated Statements of Cash Flows (unaudited) — Three Months Ended March 31, 2008 and 2007		8
	Notes to Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		31
Item 4.	Controls and Procedures		31
	PART II — OTHER INFORMATION
Item 1.	Legal Proceedings		32
Item 1A.	Risk Factors		33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		33
Item 3.	Defaults Upon Senior Securities		33
Item 4.	Submission of Matters to a Vote of Security Holders		33
Item 5.	Other Information		33
Item 6.	Exhibits		34
Signatures			35
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

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

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, the (“Exchange Act”). See the subsection of Part II, Item 1A entitled “Risk Factors” for more information.

Our internet website address is www.internetcapital.com. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports filed by us with the Securities and Exchange Commission ( the “SEC”) pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are accessible free of charge through our website as soon as reasonably practicable after we electronically file those documents with, or otherwise furnish them to, the SEC. Our website and the materials included on our website shall not be deemed a part of this Quarterly Report on Form 10-Q or incorporated herein.

2

INTERNET CAPITAL GROUP, INC.
CORE PARTNER COMPANIES AS OF MARCH 31, 2008

At March 31, 2008, our consolidated core partner companies consisted of:

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

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

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

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

At March 31, 2008, our core partner companies accounted for under the equity method consisted of:

Channel Intelligence, Inc. (“Channel Intelligence”)

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

Freeborders, Inc. (“Freeborders”)

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

Metastorm Inc. (“Metastorm”)

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

3

StarCite, Inc. (“StarCite”)

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

Vcommerce Corporation (“Vcommerce”)

Vcommerce provides on-demand commerce and fulfillment solutions for multi-channel retailers and direct-to-consumer companies of all types. Vcommerce offers turn-key solutions and customized features that allow customers to rely on Vcommerce for some or all of their e-commerce functions, from hosting an entire e-commerce site to supporting back-end functions such as managing drop-ship suppliers. As a complete solution, Vcommerce enables retailers, distributors and manufacturers to merchandise products, accept orders from customers, authorize and settle credit card transactions, ship products directly to the consumer, handle returns and manage customer service through the Vcommerce platform with minimal operating overhead and no IT infrastructure. Vcommerce generates revenue primarily through usage-based transactions.

WhiteFence, Inc. (“WhiteFence”)

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

At March 31, 2008, our other holdings partner companies primarily consisted of:

Anthem Ventures Fund, L.P. (“Anthem”)

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

Blackboard, Inc. (“Blackboard”) (Nasdaq:BBBB)

Blackboard is a provider of enterprise learning software applications and related services. Blackboard enables educational innovations by connecting people and technology.

Captive Capital Corporation (“Captive Capital”)

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

4

Commerce360, Inc. (“Commerce360”)

Commerce360 is a software-based search marketing company that improves paid and organic search campaign performance for clients including Internet Retailer 500 and Fortune 100 companies. Proprietary technology, ClickEquations™, uses advanced mathematics and statistical analysis to optimize campaigns across the entire search chain and delivers improved campaign efficiency and performance.

Creditex Group Inc. (“Creditex”)

Creditex is a global market leader and innovator in the execution and processing of credit derivatives. A leading e-trading platform in credit derivatives, Creditex is used by credit derivatives traders at the world’s top financial institutions. The platform electronically executes credit default swap (“CDS”) indices, single-name CDS and standardized structured credit products. Creditex is also leading the industry in “straight-through processing” initiatives, allowing its growing client base to reduce operational risk and transaction costs.

Emptoris, Inc. (“Emptoris”)

Emptoris integrates spend analysis, sourcing, contract management, compliance, supplier performance management and program management solutions that help customers optimize their businesses.

Entegrity Solutions Corporation (“Entegrity Solutions”)

Entegrity Solutions is a provider of application security for Java-based web, portal and web services applications.

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

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

Jamcracker, Inc. (“Jamcracker”)

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

Tibersoft Corporation (“Tibersoft”)

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

5

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

INTERNET CAPITAL GROUP, INC.
CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2008			2007
	(Unaudited)
	(in thousands,
	except per share data)
Assets
Current Assets
Cash and cash equivalents	$	44,800		$	82,031
Restricted cash		171			5
Accounts receivable, net of allowance ($41-2008; $44-2007)		10,176			7,769
Prepaid expenses and other current assets		6,777			6,883
Total current assets		61,924			96,688
Marketable securities		72,895			88,029
Hedges of marketable securities		2,028			—
Fixed assets, net		1,737			1,723
Ownership interests in Partner Companies		145,489			127,888
Goodwill		16,987			17,084
Other, net		481			1,019
Total Assets	$	301,541		$	332,431
Liabilities and Stockholders’ Equity
Current Liabilities
Current maturities of other long-term debt	$	377		$	613
Accounts payable		1,338			1,624
Accrued expenses		2,482			2,871
Accrued compensation and benefits		4,096			9,554
Deferred revenue		3,154			3,277
Total current liabilities		11,447			17,939
Other long-term debt		169			191
Hedges of marketable securities		—			3,653
Other		808			847
Minority Interests		5,461			5,143
		17,885			27,773
Stockholders’ Equity
Preferred Stock, $0.01 par value; 10,000 shares authorized, none issued or outstanding
Common Stock, $0.001 par value; 2,000,000 shares authorized, 38,700 (2008) and 38,651 (2007) issued and outstanding		39			39
Additional paid-in capital		3,568,180			3,567,495
Accumulated deficit		(3,354,276	)		(3,347,723	)
Accumulated other comprehensive income		69,713			84,847
Total Stockholders’ Equity		283,656			304,658
Total Liabilities and Stockholders’’ Equity	$	301,541		$	332,431

See accompanying notes to Consolidated Financial Statements.

6

INTERNET CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended March 31,
	2008			2007
	(in thousands, except per share data)
Revenues	$	16,022		$	11,782
Operating expenses
Cost of revenue		11,371			9,025
Selling, general and administrative		8,662			9,115
Research and development		1,465			1,568
Amortization of intangibles		44			32
Impairment related and other		31			20
Total operating expenses		21,573			19,760
		(5,551	)		(7,978	)
Other income (loss), net		5,847			(11,869	)
Interest income		829			1,478
Interest expense		(13	)		(246	)
Income (loss) before income taxes, minority interest and equity loss		1,112			(18,615	)
Income tax (expense) benefit		(54	)		2,148
Minority interest		(530	)		388
Equity loss		(7,081	)		(3,516	)
Net income (loss)	$	(6,553	)	$	(19,595	)
Basic and diluted income (loss) per share:
Net income (loss)	$	(0.17	)	$	(0.52	)
Shares used in computation of basic and diluted income (loss) per share		38,221			37,803

See accompanying notes to Consolidated Financial Statements.

7

INTERNET CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Operating Activities
Net loss	$	(6,553	)	$	(19,595	)
Adjustments to reconcile net loss to provided by cash (used in) operating activities:
Depreciation and amortization		322			360
Impairment related and other		31			20
Equity-based compensation		1,909			1,932
Equity loss		7,081			3,516
Other (income) loss		(5,847	)		11,869
Minority interest		530			(388	)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		(2,407	)		(1,066	)
Prepaid expenses and other assets		200			(1,451	)
Accounts payable		(286	)		585
Accrued expenses		(393	)		(1,179	)
Accrued compensation and benefits		(5,438	)		(6,281	)
Deferred revenue		(143	)		(231	)
Other liabilities		(154	)		—
Cash flows provided by (used in) operating activities		(11,148	)		(11,909	)
Investing Activities
Capital expenditures, net		(374	)		(385	)
Restricted cash		(9	)		—
Proceeds from sales of marketable securities		—			24
Proceeds from sales of Partner Company ownership interests		174			—
Acquisitions of ownership interests in Partner Companies		(25,613	)		(4,922	)
Cash flows provided by (used in) investing activities		(25,822	)		(5,283	)
Financing Activities
Repurchase of senior convertible notes		—			(37,087	)
Long-term debt and capital lease obligations, net		(256	)		(241	)
Cash flows provided by (used in) financing activities		(256	)		(37,328	)
Net increase (decrease) in Cash and Cash Equivalents		(37,226	)		(54,520	)
Effect of exchange rates on cash		(5	)		(7	)
Cash and Cash Equivalents at beginning of period		82,031			120,808
Cash and Cash Equivalents at the end of period	$	44,800		$	66,281

See accompanying notes to Consolidated Financial Statements.

8

INTERNET CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

Description of the Company

Internet Capital Group, Inc. (the “Company”) acquires and builds internet software and services companies that drive business productivity and reduce transaction costs between firms. Founded in 1996, the Company devotes its expertise and capital to maximizing the success of these platform companies, which are delivering software and service applications to customers worldwide.

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

2. Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements are unaudited and, in the opinion of management, include all adjustments consisting only of normal and recurring adjustments necessary for a fair presentation of the results for these interim periods. These Consolidated Financial Statements should be read in connection with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Results of operations for the three-month period ended March 31, 2008 are not necessarily indicative of the results of operations expected for the full year.

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

Three Months Ended March 31,
2008	2007
ICG Commerce	ICG Commerce
Investor Force	Investor Force

The Consolidated Balance Sheets include the following majority-owned subsidiaries at March 31, 2008 and December 31, 2007:

ICG Commerce
Investor Force

Principles of Accounting for Ownership Interests in Partner Companies

The various interests that the Company acquires in its Partner Companies are accounted for under three methods: the consolidation method, the equity method and the cost method. The applicable accounting method is generally determined based on the Company’s voting interest in a Partner Company.

9

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

2. Significant Accounting Policies — (Continued)

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

Equity Method.Partner Companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to a Partner Company depends on an evaluation of several factors, including, among others, representation on the Partner Company’s board of directors and ownership level, which is generally between a 20% and a 50% interest in the voting securities of the Partner Company, including voting rights associated with the Company’s holdings in common stock, preferred stock and other convertible instruments in the Partner Company. Under the equity method of accounting, a Partner Company’s accounts are not reflected within the Company’s Consolidated Balance Sheets and Statements of Operations; however, the Company’s share of the earnings or losses of the Partner Company is reflected in the caption “Equity loss” in the Consolidated Statements of Operations. The carrying value of equity method Partner Companies is reflected in “Ownership interests in Partner Companies” in the Company’s Consolidated Balance Sheets.

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

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

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

The Company records its ownership interest in equity securities of Partner Companies accounted for under the cost method at cost, unless these securities have readily determinable fair values based on quoted market prices, in which case these interests are valued at fair value and classified as marketable securities or some other classification in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.”

10

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

2. Significant Accounting Policies — (Continued)

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Those estimates include evaluation of the Company’s holdings in its Partner Companies, holdings in marketable securities and associated hedges, asset impairment, revenue recognition, income taxes and commitments and contingencies. Certain amounts recorded to reflect the Company’s share of losses of Partner Companies accounted for under the equity method are based on unaudited results of operations of those Partner Companies and may require adjustments in the future when audits of these entities are made final. During the three months ended March 31, 2008 those amounts were not material. It is reasonably possible that the Company’s accounting estimates with respect to the ultimate recoverability of ownership interests in Partner Companies and goodwill could change in the near term and that the effect of such changes on the financial statements could be material. At March 31, 2008, the Company believes the recorded amount of ownership interests in Partner Companies and goodwill is not impaired.

Concentration of Customer Base and Credit Risk

The following table summarizes ICG Commerce’s customers who, for at least one period in this report, represented greater than 10% of the Company’s consolidated revenue:

	Customer #1			Customer #2			Customer #3
% of consolidated revenue for the three months ended March 31, 2008		20	%		17	%		(a	)
% of consolidated revenue for the three months ended March 31, 2007		27	%		N/A			14	%
Related accounts receivable balances at March 31, 2008 (in millions)(c)	$	2.6		$	2.2			(b	)
Related accounts receivable balances at December 31, 2007 (in millions)	$	1.4			(b	)		(b	)

(a)	Customer revenues did not exceed 10% of the Company’s consolidated revenues.
(b)	Related accounts receivable are not significant.
(c)	These accounts receivable balances for customer #1 and customer #2 include $0.9 million and $2.2 million, respectively, of unbilled accounts receivable.

Stock-Based Compensation

The Company accounts for stock-based awards under Financial Accounting Standards Board (“FASB”) No. 123R, “Share-Based Payment,” (“SFAS No. 123R”) using the modified prospective method, which requires measurement of compensation cost for all stock-based awards at fair value on date of grant and recognition of compensation cost over the service periods for awards expected to vest. The Company generally recognizes compensation expense for awards granted after January 1, 2006 on a straight-line basis over the vesting period of the awards. Fair value for stock options and stock appreciation rights (“SARs”) is determined using the black-scholes model and the relevant expense is amortized over the applicable vesting period. See Note 3.

The estimation of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. The Company considers many factors when estimating expected forfeitures, including types of awards, employee class, and historical experience. Actual results, and future changes in estimates, may differ substantially from the Company’s current estimates.

11

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

2. Significant Accounting Policies — (Continued)

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS No. 157”). SFAS No. 157 clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. In February 2008, the FASB issued two final staff positions (“FSP”) amending SFAS No. 157. FSP SFAS 157-1 amends SFAS 157 to exclude SFAS No. 13, “Accounting for Leases,” and its related interpretive accounting pronouncements that address leasing transactions. FSP SFAS 157-2 delays the effective date of SFAS No. 157 until fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. We adopted SFAS No. 157 on January 1, 2008, except for the items covered by FSP SFAS 157-2.

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

• Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

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

	Balance
	March 31, 2008		Level 1		Level 2			Level 3
Cash equivalents (Money market accounts)	$	40.7	$	40.7	$	—		$	—
Marketable securities (see Note 5)		72.9		72.9		—			—
Hedges of marketable securities (see Note 5)		2.0		—		2.0	(a)		—
	$	115.6	$	113.6	$	2.0		$	—

(a) The Company’s counterparty provides the Company with a quarterly statement of the market value of the cashless collar contracts based on model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

On February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” Under this Standard, we may elect to report cost and equity partner companies, marketable securities, hedges and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS No. 159 is effective for us for the fiscal year beginning January 1, 2008. We have elected not to apply the fair value option to any of our current eligible financial assets and liabilities.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”). SFAS No. 141(R) amends the principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for our fiscal year beginning on January 1, 2009, and we will apply SFAS No. 141(R) prospectively to all business combinations subsequent to our effective date.

12

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

2. Significant Accounting Policies — (Continued)

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 establishes accounting and reporting standards for a noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 also establishes disclosure requirements that clarify the distinctions between controlling and noncontrolling interests and requires the separate disclosure of income attributable to controlling and noncontrolling interests. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, which is our fiscal year beginning January 1, 2009. We are currently evaluating the impact that the adoption of SFAS No. 160 will have on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of SFAS No. 133, “Accounting for Derivatives and Hedging Activities.” SFAS No. 161 is intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable financial statement users to better understand the effects of derivatives and hedging on an entity’s financial position, financial performance and cash flows. The provisions of SFAS No. 161 are effective for interim periods and fiscal years beginning after November 15, 2008, which is our fiscal year beginning January 1, 2009. We are currently evaluating the impact the adoption of SFAS No. 161 will have on our consolidated financial statements.

3. Equity-Based Compensation

Total equity-based compensation for the three months ended March 31, 2008 and March 31, 2007 were $1.8 million and $1.9 million, respectively. These amounts are primarily included in “Selling, general and administrative” on the Company’s Consolidated Statements of Operations for their respective periods. The following table provides additional information related to the Company’s equity-based compensation ($ in millions):

							Weighted Average
							Years Remaining of
							Equity-Based
	Three Months Ending				Unrecognized Equity-		Compensation
	March 31,				Based Compensation		Expense at March
	2008		2007		at March 31, 2008		31, 2008
SARs	$	0.9	$	0.9	$	5.7		1.5
Stock Options		0.1		0.1		0.1		0.7
Restricted Stock		0.5		0.6		1.2		0.6
DSUs		0.1		0.1		0.3		0.9
Equity-Based Compensation	$	1.6	$	1.7		7.3
Equity-Based Compensation for Consolidated Partner Companies		0.2		0.2		1.7		2.8
Equity-Based Compensation	$	1.8	$	1.9	$	9.0

Deferred Stock Units (“DSUs”)

During the three months ended March 31, 2008, the Company issued 36,000 DSUs to the Company’s non-management directors under the Non-Management Director Compensation Plan that will vest in the first quarter of 2009. These DSUs were valued at $0.3 million.

During the three months ended March 31, 2008, the Company issued 12,347 DSUs in lieu of cash which vested immediately to the Company’s non-management directors for services provided to the Company’s Board and its committees. The expense of $0.1 million and less than $0.1 million for the three months ended March 31, 2008 and 2007, respectively, associated with the quarterly grants for service is included in “Selling, General and Administrative” on the Company’s Consolidated Statements of Operations, but is not included in the summarized Equity-Based Compensation table above.

13

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

4. Ownership interests in Partner Companies and Goodwill

The following table summarizes the Company’s ownership interests in Partner Companies:

	March 31,		December 31,
	2008		2007
	(in thousands)
Ownership interests in Partner Companies — Equity Method	$	115,895	$	98,144
Ownership interests in Partner Companies — Cost Method		29,594		29,744
	$	145,489	$	127,888

In the three months ended March 31, 2008, Commerce 360, which was previously accounted for under the cost method, became an equity method company due to the Company’s participation in a financing round. Prior periods have not been restated to reflect prior equity losses from the original acquisition in Commerce360 as that acquisition was immaterial.

The following table summarizes the Company’s goodwill in Partner Companies (in thousands):

	(in thousands)
Goodwill at December 31, 2007	$	17,084
Reduction due to dilution of a consolidated partner company’s ownership		(97	)
Goodwill at March 31, 2008	$	16,987

As of March 31, 2008 and December 31, 2007, all of the Company’s goodwill was allocated to the core segment.

Equity Method Companies

The following unaudited summarized financial information relates to the Company’s Partner Companies accounted for under the equity method of accounting at March 31, 2008 and December 31, 2007. This aggregate information has been compiled from the financial statements and capitalization tables of the respective equity method Partner Companies.

	Approximate Voting Ownership:
Equity Method Partner Company	March 31, 2008			December 31, 2007
Channel Intelligence		46	%		41	%
Commerce360		30	%		8	%
Freeborders		32	%		32	%
GoIndustry		29	%		31	%
Metastorm		32	%		32	%
StarCite		32	%		26	%
Vcommerce		48	%		48	%
WhiteFence		35	%		35	%

14

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

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

Balance Sheets (Unaudited)

	March 31, 2008(1)		December 31, 2007(2)
	(in thousands)
Cash, cash equivalents and short-term investments	$	55,010	$	41,317
Other current assets		91,150		85,806
Other non-current assets		185,810		171,609
Total assets	$	331,970	$	298,732
Current liabilities	$	106,970	$	105,158
Non-current liabilities		11,603		11,584
Long-term debt		13,003		15,992
Stockholders’ equity		200,394		165,998
Total liabilities and stockholders’ equity	$	331,970	$	298,732
Total carrying value	$	115,895	$	98,144

(1)	Includes Channel Intelligence, Commerce360, Freeborders, GoIndustry, Metastorm, StarCite, Vcommerce and WhiteFence.
(2)	Includes Channel Intelligence, Freeborders, GoIndustry, Metastorm, StarCite, Vcommerce and WhiteFence.

At March 31, 2008, the Company’s carrying value in equity method Partner Companies in the aggregate exceeded the Company’s share of net assets of these equity Partner Companies by approximately $53.7 million. This excess is allocated $46.5 million to goodwill, which is not amortized, and $7.2 million to intangibles, which are generally amortized over a range of 3 to 7 years. Amortization expense associated with these intangibles was $0.2 million for the three months ended March 31, 2008 and is included in the table below in the line item “Total equity income (loss),” and is included in “Equity Loss” on the Company’s Consolidated Statements of Operations.

Results of Operations (Unaudited)

	Three Months Ended March 31,
	2008 (1)			2007(2)
	(in thousands)
Revenue	$	56,812		$	48,354
Net income (loss)	$	(13,916	)	$	(8,621	)
Total equity income (loss)	$	(7,081	)	$	(3,516	)

(1)	Includes Channel Intelligence, Commerce360, Freeborders, GoIndustry, Metastorm, StarCite, Vcommerce and WhiteFence.
(2)	Includes Channel Intelligence, Freeborders, GoIndustry, Marketron, Metastorm, StarCite, Vcommerce and White Fence.

Other Equity Company Information

In February 2008, GoIndustry issued equity in conjunction with a financing and an acquisition transaction. In conjunction with the financing, the Company purchased an additional 52,690,950 shares of GoIndustry in exchange for approximately $10.5 million. As a result of these transactions the Company’s ownership in GoIndustry was reduced from 31% to approximately 29%. The reduction in the Company’s ownership interest in GoIndustry was accounted for as a disposition of shares and resulted in a dilution loss for accounting purposes. The dilution loss totaled $1.3 million and was recorded as an equity transaction with a decrease to additional paid-in capital. At March 31, 2008, the Company owns 133,832,852 shares of GoIndustry, or approximately 29% of the outstanding shares.

In the three months ended March 31, 2008, the Company increased its ownership percentage in certain Partner Companies through the Company’s acquisition of existing shares and participation in financing rounds. The Company is in the process of finalizing its purchase price allocations for these transactions.

The Company has aggregate contingent gains of $6.6 million associated with outstanding escrows related to sales of prior equity method Partner Companies. These escrows primarily relate to sale consideration to satisfy potential purchase price allocations and/or potential indemnity claims. The Company records escrow arrangements at the time the Company is entitled to the escrow proceeds, the amount is fixed or determinable and realization is assured.

15

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

5. Marketable Securities and Related Derivatives

Marketable securities represent the Company’s holdings in common stock of publicly traded companies accounted for under the cost method of accounting. The cost, unrealized holding gains/(losses), and fair value of marketable securities at March 31, 2008 and December 31, 2007 were as follows:

					Unrealized
	Common Shares				Holding
	Owned		Cost		Gains/(Losses)		Fair Value
			(in thousands, except shares)
March 31, 2008
Blackboard		2,187,060	$	3,162	$	69,732	$	72,895
December 31, 2007
Blackboard		2,187,060	$	3,162	$	84,867	$	88,029

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

The Company holds certain marketable securities in Partner Companies that are publicly traded. The Company manages the Company’s exposure to and benefits from price fluctuations of these marketable securities by selectively using derivative securities or hedges. Although these instruments are derivative securities, their economic risks are similar to, and managed on the same basis as, risks of the other equity instruments the Company holds. These instruments are marked to market through earnings. As of March 31, 2008, the Company has entered into cashless collar contracts with various expiration dates between March 15, 2010 and October 15, 2010 to hedge 1,625,000 shares of its total holdings of 2,187,060 shares of Blackboard common stock at weighted average minimum and maximum prices per share of $24.27 and $56.35, respectively. As of March 31, 2007, the Company had entered into cashless collar contracts with expiration dates of either March 15, 2010 or April 15, 2010 to hedge 1,250,000 shares of its total holdings of 2,187,060 shares of Blackboard common stock at weighted average minimum and maximum prices of $23.00 and $54.06, respectively. The marked to market impact to earnings of these instruments was income of $5.7 million in the three months ended March 31, 2008 and expense of $1.1 million for the three months ended March 31, 2007, respectively. The income in the three months ended March 31, 2008 is primarily driven by the change in the quarter of Blackboard’s closing stock price decreasing from $40.25 per share at the beginning of the quarter versus Blackboard’s closing stock price of $33.33 per share at the end of the quarter ended March 31, 2008. The loss in the three months ended March 31, 2007 is primarily driven by the change in the quarter of Blackboard’s closing stock price increasing from $30.04 per share at the beginning of the quarter versus Blackboard’s closing stock price of $33.63 per share at the end of the quarter ended March 31, 2007. This income and loss, respectively, is reflected in “Other income (loss), net” for their appropriate period on the Company’s Consolidated Statements of Operations. In future quarters, the mark to market impact will generally be an expense if Blackboard’s stock price rises or income if Blackboard’s stock price declines. If the Company holds these hedges through their maturity dates and Blackboard’s stock price remains within the weighted average minimum and maximum prices per share, the value of the hedges will be zero at maturity. The fair value of these instruments was an asset of $2.0 million at March 31, 2008 which is included in “Hedges of Marketable Securities” in the asset section of the Company’s Consolidated Balance Sheets and was a liability of $3.7 million at December 31, 2007 which is included in “Hedges of Marketable Securities” in the liabilities section of the Company’s Consolidated Balance Sheets.

16

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

6. Debt

Senior Convertible Notes

In February 2007, the Company repurchased and extinguished the remaining $26.6 million of its April 2009 senior convertible notes for $37.1 million plus accrued interest. The Company recorded a loss of $10.9 million on these repurchases, including $0.3 million for the acceleration of deferred financing fees during the three months ended March 31, 2007. These losses are included in “Other income (loss), net” for their appropriate period within the Company’s Consolidated Statements of Operations.

The Company recorded interest expense of $0.2 million for the three months ended March 31, 2007 related to these notes. The Company expensed $0.1 million related to these fees in the three months ended March 31, 2007, excluding any expense relating to accelerations of deferred financing fees as a result of the repurchases described above.

Other Long-Term Debt

The Company’s other long-term debt at March 31, 2008 of $0.5 million relates to its consolidated Partner Companies, ICG Commerce and Investor Force, and primarily consists of secured notes due to the current shareholders of ICG Commerce’s former German subsidiary. The long-term debt is due as follows: $0.4 million is due in 2008 and the remaining $0.1 million is due in 2009.

Loan and Credit Agreements

On September 30, 2002, the Company entered into a loan agreement with Comerica Bank (the “Loan Agreement”) to provide for the issuance of letters of credit up to $20 million, subject to a cash-secured borrowing base as defined by the Loan Agreement. The Loan Agreement was reduced to $10.0 million in 2004. In December 2007, the Loan Agreement was extended to December 13, 2008. Issuance fees of 0.50% per annum of the face amount of each letter of credit will be paid to Comerica Bank subsequent to issuance. The Loan Agreement also is subject to a 0.25% per annum unused commitment fee payable to the bank quarterly. No amounts were outstanding at March 31, 2008 or December 31, 2007.

On May 8, 2008, the Company entered into a series of loan agreements with Credit Suisse Capital LLC. Pursuant to these agreements, the Company may, from time to time, borrow funds secured by the cashless collar contracts that the Company previously entered into with respect to 1.625 million of its shares of Blackboard common stock. The loans bear interest, which is payable quarterly in arrears, at the three-month U.S. dollar LIBOR rate, computed on the basis of a 30-day month and a 360-day year. This interest rate resets on the first day of each calendar quarter. The maturity of each of the loans corresponds with the expiration of the underlying cashless collar contract. Accordingly, the maturity dates of the loans range from March 15, 2010 to October 15, 2010. The maximum borrowing capacity under each of the loan agreements equals the present value of the minimum value of the underlying cashless collar contract computed using the three month U.S. dollar LIBOR rate. As of May 8, 2008, the aggregate maximum borrowing capacity under the loan agreements is approximately $37 million. The Company has not drawn any amounts under the loan agreements to date.

17

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

7. Segment Information

The Company’s reportable segments using the “management approach” under SFAS No. 131, “Disclosure About Segments of a Business Enterprise and Related Information,” consist of two operating segments, the core operating segment and the other holdings operating segment. Each segment includes the results of the Company’s Consolidated Partner Companies and records the Company’s share of earnings and losses of Partner Companies accounted for under the equity method of accounting and captures the Company’s basis in the assets of all of its Partner Companies. Any marketable securities are considered “corporate” assets whereas, prior to becoming marketable securities, the Partner Company would have been included in the core or other holdings category.

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

Approximately 11% of the Company’s consolidated revenues for the three months ended March 31, 2008 relates to sales generated in the United Kingdom. As of March 31, 2008 and December 31, 2007, the Company’s assets were located primarily in the United States.

Segment Information
(in thousands)
							Total			Reconciling Items								Consolidated
	Core			Other Holdings			Segment			Dispositions		Corporate			Other*			Results
Three Months Ended March 31, 2008
Revenues	$	16,022		$	—		$	16,022		$	—	$	—		$	—		$	16,022
Net income (loss)	$	(6,100	)	$	(1,102	)	$	(7,202	)	$	—	$	(4,674	)	$	5,323		$	(6,553	)
Assets	$	132,407		$	51,359		$	183,766		$	—	$	117,775		$	—		$	301,541
Three Months Ended March 31, 2007
Revenues	$	11,782		$	—		$	11,782		$	—	$	—		$	—		$	11,782
Net income (loss)	$	(5,074	)	$	(768	)	$	(5,842	)	$	493	$	(4,919	)	$	(9,327	)	$	(19,595	)
Assets	$	145,659		$	30,655		$	176,314		$	22,928	$	112,425		$	—		$	311,667

*	Three Months Ended March 31,
	2008			2007
Other reconciling items to net income (loss) are as follows:
Other income (loss) (Note 9)	$	5,853		$	(11,863	)
Corporate income tax benefit		—			2,148
Minority interest		(530	)		388
	$	5,323		$	(9,327	)

18

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

8. Parent Company Financial Information

Parent company financial information is provided to present the financial position and results of operations of the Company and its wholly-owned subsidiaries as if the Partner Companies accounted for under the consolidation method of accounting were accounted for under the equity method of accounting for all applicable periods presented. The Company’s share of the consolidated Partner Companies’ losses is included in “Equity loss” in the Parent Company Statements of Operations for all periods presented based on the Company’s ownership percentage in each period. The carrying value of the consolidated companies as of March 31, 2008 and December 31, 2007 is included in “Ownership interests in Partner Companies” in the Parent Company Balance Sheets.

Parent Company Balance Sheets

	As of March 31, 2008		As of December 31, 2007
	(in thousands)
Assets
Cash and cash equivalents	$	36,672	$	69,125
Other current assets		5,977		6,286
Current assets		42,649		75,411
Ownership interests in Partner Companies		168,447		149,407
Marketable securities		72,895		88,029
Hedges of marketable securities		2,028		—
Other		202		644
Total assets	$	286,221	$	313,491
Liabilities and stockholders’ equity
Current liabilities	$	2,050	$	4,666
Hedges of marketable securities		—		3,653
Non-current liabilities		496		495
Stockholders’ equity		283,675		304,677
Total liabilities and stockholders’ equity	$	286,221	$	313,491

Parent Company Statements of Operations

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Revenues	$	—		$	—
Operating expenses
General and administrative		5,432			6,033
Total operating expenses		5,432			6,033
		(5,432	)		(6,033	)
Other income (loss), net		5,853			(11,863	)
Interest income (expense), net		758			1,114
Income (loss) before income taxes and equity loss		1,179			(16,782	)
Income tax benefit (expense)		—			2,148
Equity loss		(7,732	)		(4,961	)
Net income (loss)	$	(6,553	)	$	(19,595	)

19

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

8. Parent Company Financial Information — (Continued)

Parent Company Statements of Cash Flows

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Operating Activities
Net income (loss)	$	(6,553	)	$	(19,595	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		35			34
Equity-based compensation		1,763			1,780
Equity loss		7,732			4,961
Other (income) loss		(5,853	)		11,863
Changes in assets and liabilities, net of effect of acquisitions:
Prepaid expenses and other assets		310			(1,623	)
Accounts payable		(2	)		156
Accrued expenses		(589	)		(724	)
Accrued compensation and benefits		(2,030	)		(2,359	)
Cash provided by (used in) operating activities		(5,187	)		(5,507	)
Investing Activities
Capital expenditures, net		(2	)		(14	)
Proceeds from sales of marketable securities		—			24
Proceeds from sales of ownership interests in Partner Companies		174			—
Acquisitions of ownership interests in Partner Companies, net		(27,438	)		(4,922	)
Cash provided by (used in) investing activities		(27,266	)		(4,912	)
Financing Activities
Repurchase of senior convertible notes		—			(37,087	)
Cash provided by (used in) financing activities		—			(37,087	)
Net increase (decrease) in cash and cash equivalents		(32,453	)		(47,506	)
Cash and cash equivalents at beginning of period		69,125			104,249
Cash and cash equivalents at end of period	$	36,672		$	56,743

9. Other Income (Loss)

Other Income (Loss), net

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

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Loss on repurchase of convertible notes (Note 6)	$	—		$	(10,833	)
Unrealized gain (loss) on mark-to-market of hedges (Note 5)		5,680			(1,114	)
Sales/distributions of ownership interests in Partner Companies		174			20
Realized gains (losses) on marketable securities		—			24
Other		(1	)		40
	$	5,853		$	(11,863	)
Total other income (loss) for Consolidated Partner Companies		(6	)		(6	)
	$	5,847		$	(11,869	)

20

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

10. Income Taxes

The Company recorded a tax benefit of $2.1 million for the three months ended March 31, 2007 related to the operating loss for that period. This benefit can be realized through a carryback to 2005. No benefit was recorded for the operating loss for the three month period ended March 31, 2008 as realization of this benefit is not considered to be more likely than not.

Excluding the loss for the three months ended March 31, 2008, the Company had federal net operating loss carry-forwards of approximately $506.2 million that may be used to offset future taxable income. The Company also had capital loss carry-forwards of approximately $467 million that may be used to offset future capital gains. The net operating loss and capital loss carry-forwards, as well as certain other deferred tax assets, are subject to significant limitations on their utilization. The annual limitation on the utilization of these carry-forwards is approximately $14.5 million. These net operating loss carry-forwards expire between 2014 and 2027, and the capital loss carry-forwards expire between 2008 and 2012. Additional limitations on the utilization of these carry-forwards may be imposed if the Company experiences another change in ownership.

The Company’s net deferred tax asset of $485 million at March 31, 2008 consists of deferred tax assets of $511 million, relating primarily to Partner Company basis differences, capital and net operating loss carry forwards, offset by deferred tax liabilities of $25.1 million, primarily related to unrealized appreciation in available for sale securities. The Company has recorded a full valuation allowance against its net deferred tax assets.

11. Net Income (Loss) per Share

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

	Three Months Ended March 31,
	2008			2007
	(in thousands, except per share data)
Basic and Diluted:
Net income (loss)	$	(6,553	)	$	(19,595	)
Basic and Diluted:
Net income (loss) per share	$	(0.17	)	$	(0.52	)
Basic and diluted weighted average common shares outstanding		38,221			37,803

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

			Weighted Average
	Shares		Price Per Share
Three Months Ended March 31, 2008
SARs		3,616,115	$	7.58
Stock options		637,365	$	37.13
Restricted stock		286,532	$	—
Deferred stock units		36,000	$	—
Warrants		12,500	$	6.00
Three Months Ended March 31, 2007
SARs		3,650,179	$	7.45
Restricted stock		794,764	$	—
Stock options		637,454	$	37.12
Warrants		12,500	$	6.00
Deferred stock units		31,500	$	—

21

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

12 . Comprehensive Income (Loss)

Comprehensive income (loss) is the change in equity of a business enterprise during a period resulting from transactions and other events and circumstances from non-owner sources. Excluding net loss, the Company’s primary source of comprehensive loss is net unrealized holding gains (losses) related to its marketable securities. The following summarizes the components of comprehensive loss:

	Three Months Ended March 31,
	2008			2007
	(Unaudited)
	(in thousands)
Net loss	$	(6,553	)	$	(19,595	)
Other comprehensive income (loss):
Unrealized holding (losses) gains in marketable securities		(15,135	)		7,853
Reclassification adjustments/realized net gains on marketable securities		1			(380	)
Comprehensive loss	$	(21,687	)	$	(12,122	)

22

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth elsewhere in this Report and the risks discussed in our other SEC filings. The following discussion should be read in conjunction with our audited Consolidated Financial Statements and the related Notes thereto included in this Report.

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

The Consolidated Financial Statements include the consolidated accounts of Internet Capital Group, Inc., a company incorporated in Delaware, and its subsidiaries, both wholly-owned and consolidated (Internet Capital Group, Inc. and all such subsidiaries, are hereinafter referred to as “we,” “ICG,” the “Company” or “Internet Capital Group”), and have been prepared in accordance with GAAP.

Executive Summary

The Company acquires and builds internet software and services companies that drive business productivity and reduce transaction costs between firms. The Company devotes its expertise and capital to maximizing the success of these platform companies, which are delivering software and service applications to customers worldwide. We view the Company as primarily having two components: corporate and our partner companies. Corporate primarily holds our cash, marketable securities and ownership interests in partner companies. Our partner companies are grouped into two operating segments consisting of the core segment and the other holdings segment. The core operating segment includes those partner companies in which the Company’s management takes a very active role in providing strategic direction and management assistance. The other holdings operating segment includes holdings in companies over which, in general, we have less influence due to the fact that they are public and/or we have a relatively small ownership stake. From time to time, partner companies are disposed of by ICG or cease operations.

The various interests that we acquire in our partner companies are accounted for under one of three accounting methods: the consolidation method, the equity method or the cost method. The applicable accounting method is generally determined based on our voting interest in a partner company. Generally, if we own more than 50% of the outstanding voting securities of a partner company, and for which other stockholders do not possess the right to affect significant management decisions, a partner company’s accounts are reflected within our consolidated financial statements. Generally, if we own between 20% and 50% of the outstanding voting securities, a partner company’s accounts are not reflected within our consolidated financial statements; however, our share of the earnings or losses of the partner company is reflected in the caption “Equity loss” in our consolidated statements of operations. Partner companies not accounted for under either the consolidation or the equity method of accounting are accounted for under the cost method of accounting. Under this method, our share of the earnings or losses of these companies is not included in our consolidated statements of operations.

Because we own significant interests in information technology and e-commerce companies, many of which have generated net losses, we have experienced, and expect to continue to experience, significant volatility in our quarterly results. While many of our partner companies have consistently reported losses, we have recorded net income in certain periods and experienced significant volatility from period-to-period due to infrequently occurring transactions and other events relating to our ownership interests in partner companies.

23

These transactions and events are described in more detail in our Notes to consolidated financial statements and include dispositions of, and changes to, our partner company ownership interests, dispositions of our holdings of marketable securities and debt repurchases.

Liquidity and Capital Resources

The following table summarizes our and our consolidated subsidiaries’ cash and cash equivalents, restricted cash, and marketable securities as of March 31, 2008 and December 31, 2007:

	March 31, 2008						December 31, 2007
			Consolidated						Consolidated
	Corporate		Subsidiaries		Total		Corporate		Subsidiaries		Total
					(in thousands)
Cash and cash equivalents	$	36,672	$	8,128	$	44,800	$	69,125	$	12,906	$	82,031
Restricted cash(1)		—		171		171		—		5		5
	$	36,672	$	8,299	$	44,971	$	69,125	$	12,911	$	82,036
Marketable securities(2)	$	74,923	$	—	$	74,923	$	84,376	$	—	$	84,376

(1)	Restricted cash at March 31, 2008 and December 31, 2007 does not include less than $0.1 million and $0.2 million, respectively, of long-term restricted cash included in “Other” assets on the Company’s Consolidated balance sheets.
(2)	Includes a contributing asset of $2.0 million at March 31, 2008 and an offsetting liability of $3.7 million at December 31, 2007 related to derivative instruments associated with the Company’s marketable securities.

We believe existing cash and cash equivalents, our borrowing facilities and proceeds from the potential sales of all or a portion of our interests in certain marketable securities and partner companies to be sufficient to fund our cash requirements for the foreseeable future, including any future commitments to partner companies, debt obligations and general operations requirements. At March 31, 2008, as well as the date of this filing, we were not obligated for any significant funding and guarantee commitments to existing partner companies. We will continue to evaluate acquisition opportunities and may acquire additional ownership interests in new and existing partner companies in the next twelve months; however, such acquisitions will generally be made at our discretion.

Consolidated working capital decreased by $28.3 million from December 31, 2007 to March 31, 2008, primarily due to fundings to partner companies.

Summary of Statements of Cash Flows

	As of March 31,
	2008			2007
	(in thousands)
Cash provided by (used in) operating activities	$	(11,148	)	$	(11,909	)
Cash provided by (used in) investing activities	$	(25,822	)	$	(5,283	)
Cash provided by (used in) financing activities	$	(256	)	$	(37,328	)

The net decrease in cash used in operating activities is the result of improved working capital components in the 2008 period versus the 2007 period.

The increase in cash used in investing activities from 2007 to 2008 is the result of a greater aggregate amount of partner company funding in 2008 than in 2007.

The decrease in cash used in financing activities from 2007 to 2008 is primarily related to the repurchase of $26.6 million of principal of convertible notes for $37.1 million in cash in 2007.

We and our consolidated subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. We do not expect the ultimate liability with respect to these actions will materially affect our financial position or cash flows.

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Contractual Cash Obligations and Commercial Commitments

We had no other material changes to contractual cash obligations and commercial commitments for the three months ended March 31, 2008.

Off-Balance Sheet Arrangements

We are not involved in any off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Our Partner Companies

As of March 31, 2008, we owned interests in 18 partner companies that are categorized below based on segment and method of accounting.

CORE PARTNER COMPANIES (%Voting Interest)
Consolidated	Equity	Cost
ICG Commerce (65%)	Channel Intelligence (46%)	(none)
Investor Force (80%)	Freeborders (32%)
	Metastorm (32%)
	StarCite (32%)
	Vcommerce (48%)
	WhiteFence (35%)

OTHER HOLDINGS COMPANIES (%Voting Interest)
Consolidated	Equity	Cost
(none)	Commerce360 (30%)	Anthem (9%)
	GoIndustry (29%)(2)	Blackboard(1)
		Captive Capital (5%)
		Creditex (13%)
		Emptoris (5%)
		Entegrity Solutions (2%)
		Jamcracker (2%)
		Tibersoft (5%)

(1)	As of March 31, 2008, we own 2,187,060 shares of Blackboard (NASDAQ:BBBB) (see “Note 5 — Marketable Securities” to our consolidated financial statements.)
(2)	As of March 31, 2008, we own 133,832,852 shares, or approximately 29% of the voting securities, of GoIndustry. GoIndustry’s common stock is traded on the AIM market of the London Stock Exchange under ticker symbol GOI. See “Note 4 — Ownership Interests in Partner Companies and Goodwill” to our consolidated financial statements)

Results of Operations

The following summarizes the unaudited selected financial information related to our segments. Each segment includes the results of our consolidated partner companies and records our share of the earnings and losses of partner companies accounted for under the equity method of accounting. The partner companies included within the segments are the same 18 partner companies for 2008 and 2007. Additionally, Commerce360 is included in the other holdings segment from the date it became an equity method partner company in the three months ended March 31, 2008. The method of accounting for any particular partner company may change based on our ownership interest.

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Corporate expenses represent the general and administrative expenses of our business operations, which include supporting our partner companies and operating as a public company. The measure of segment net loss reviewed by us does not include items such as gains on the disposition of partner company ownership interests and marketable securities holdings, losses on convertible note repurchases and transactions, income taxes and accounting changes, which are reflected in other reconciling items in the following table.

Segment Information
(in thousands)
				Other			Total			Reconciling Items								Consolidated
	Core			Holdings			Segment			Dispositions		Corporate			Other			Results
For the Three Months Ended March 31, 2008
Revenues	$	16,022		$	—		$	16,022		$	—	$	—		$	—		$	16,022
Net income (loss)	$	(6,100	)	$	(1,102	)	$	(7,202	)	$	—	$	(4,674	)	$	5,323		$	(6,553	)
For the Three Months Ended March 31, 2007
Revenues	$	11,782		$	—		$	11,782		$	—	$	—		$	—		$	11,782
Net income (loss)	$	(5,074	)	$	(768	)	$	(5,842	)	$	493	$	(4,919	)	$	(9,327	)	$	(19,595	)

For the Three Months Ended March 31, 2008 and 2007

Results of Operations — Core Companies

The following presentation of the results of operations of our core companies includes the results of our consolidated core partner companies and our share of the results of our equity method core partner companies.

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Selected data:
Revenues	$	16,022		$	11,782
Cost of revenue		(11,371	)		(9,025	)
Selling, general and administrative		(3,230	)		(3,082	)
Research and development		(1,465	)		(1,568	)
Amortization of intangibles		(44	)		(32	)
Impairment related and other		(31	)		(20	)
Operating expenses		(16,141	)		(13,727	)
Interest and other		(2	)		112
Equity loss		(5,979	)		(3,241	)
Net loss	$	(6,100	)	$	(5,074	)

Revenue

Revenue increased $4.2 million from $11.8 million in 2007 to $16.0 million in 2008. This revenue increase was primarily driven by increased revenues at ICG Commerce from new and existing customers.

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Operating Expenses

Operating expenses increased $2.4 million, from $13.7 million in the three months ended March 31, 2007 to $16.1 million in the three months ended March 31, 2008. This operating expense increase was due to increased operating expenses at ICG Commerce to service existing and new customers contracts.

Equity Loss

A portion of our net results from our core companies is derived from those partner companies in which we hold a substantial minority ownership interest. Our share of the income or losses of these companies is recorded in our Consolidated Statement of Operations under “Equity loss.”

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Selected data:
Total revenues	$	44,404		$	35,485
Total net loss	$	(12,939	)	$	(7,661	)
Our share of total net loss (“equity loss”)	$	(5,979	)	$	(3,241	)

Our share of the net loss increased in 2008 versus 2007 as Metastorm recorded increased intangible amortization expense related to its second half of 2007 acquisitions in the 2008 quarter and some of our more recent acquisitions (primarily Channel Intelligence and Vcommerce) continue to increase operating expenses to expand market share.

Results of Operations — Other Holdings Companies

The following presentation of the results of operations of our other holdings companies includes the results of our consolidated other holdings partner companies and our share of the results of our equity method other holdings partner companies.

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Selected data:
Equity loss	$	(1,102	)	$	(768	)
Net loss	$	(1,102	)	$	(768	)

Equity loss increased in the first quarter of 2008 from the comparable 2007 period as our share of GoIndustry’s net loss for first quarter of 2008 increased versus the 2007 period.

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Results of Operations — Reconciling Items

Dispositions

The following is a summary of the components of “Dispositions,” a reconciling item for segment reporting purposes:

	Three Months Ended March 31,
	2008		2007
Equity income of partner companies sold/disposed of	$	—	$	493
Net income (loss)	$	—	$	493

Corporate

	Three Months Ended March 31,
	2008			2007
	(in thousands)
General and administrative	$	(5,432	)	$	(6,033	)
Interest income, net		758			1,114
Net loss	$	(4,674	)	$	(4,919	)

General and Administrative

Our general and administrative expenses decreased $0.6 million for the three months ended March 31, 2008 versus the comparable 2007 period, primarily due to employee-related expenses.

Interest Income/Expense

The interest income, net decrease of $0.4 million for the three months ended March 31, 2008 from the same period in 2007 is attributable to lower cash balances in the first quarter of 2008 than those in the first quarter of 2007.

Other

	Three Months Ended March 31,
	2008			2007
	(in thousands)
Corporate other income (loss) (Note 9)	$	5,853		$	(11,863	)
Corporate income tax benefit		—			2,148
Minority interest		(530	)		388
Net income (loss)	$	5,323		$	(9,327	)

Corporate Other Income (Loss), Net

Other income (loss), net was income of $5.9 million in the three months ended March 31, 2008 and a loss of $11.9 million in the comparable 2007 period. Other income in the three months ended March 31, 2008 is primarily driven by our Blackboard hedges. See Note 5 to our Consolidated Financial Statements. The loss in the three months ended March 31, 2007 is primarily the result of a $10.8 million loss on the repurchase of our senior convertible notes. See Note 6 to our Consolidated Financial Statements.

Corporate Income Tax

We recorded a tax benefit of $2.1 million for the 2007 period. See Note 10 to our Consolidated Financial Statements. No benefit was recorded for the loss for the three month period ended March 31, 2008 as realization of this benefit is not considered to be more likely than not.

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Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to our interests in our partner companies, marketable securities, revenues, income taxes and commitments and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies are important to the presentation of our financial statements and require the most difficult, subjective and complex judgments.

Valuation of Goodwill, Intangible Assets and Ownership Interests in Partner Companies

We perform ongoing business reviews and perform annual goodwill impairment tests in accordance with SFAS No. 142, “Goodwill and Other Intangible Assets” and other impairment tests in accordance with Accounting Principles Board (“APB”) opinion No. 18, “Equity Method Investments” and SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” and use quantitative and qualitative measures to assess the need to record impairment losses on goodwill, intangible assets and ownership interests in our partner companies when impairment indicators are present. Where impairment indicators are present, we determine the amount of the impairment charge as the excess of the carrying value over the fair value. We determine fair value based on a combination of the discounted cash flow methodology, which is based upon converting expected future cash flows to present value, and the market approach, which includes analysis of market price multiples of companies engaged in lines of business similar to the company being evaluated. The market price multiples are selected and applied to the company based on relative performance, future prospects and risk profile of the company in comparison to the guideline companies. Significant assumptions relating to future operating results must be made when estimating the future cash flows associated with these companies. Significant assumptions relating to achievement of business plan objectives and milestones must be made when evaluating whether impairment indicators are present. Should unforeseen events occur or should operating trends change significantly, additional impairment losses could occur.

Revenue Recognition

ICG Commerce may assume all or a part of a customer’s procurement function as part of sourcing arrangements. Typically, in these engagements, ICG Commerce is paid a fixed fee agreed upon in advance and/or a fee based on a percentage of the amount spent by its customers’ respective purchasing department in the specified areas ICG Commerce manages. Additionally, in some cases, ICG Commerce has the opportunity to earn additional fees based on the level of savings achieved for customers. ICG Commerce recognizes revenue as earned which is typically over the life of the customer contract (which approximates the life of the customer relationship) and any additional fees as earned.

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Deferred Income Taxes

We record a valuation allowance to reduce our net deferred tax assets to an amount that is more likely than not to be realized. We consider future taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowance. In the event that we determine that we would not be able to realize all or part of our net deferred tax assets, an adjustment to the deferred tax assets is charged to earnings in the period such determination is made. Likewise, if we later determine that it is more likely than not that the net deferred tax assets would be realized, then the previously provided valuation allowance would be reversed.

Commitments and Contingencies

From time to time, we are a defendant or plaintiff in various legal actions that arise in the normal course of business. From time to time, we are also a guarantor of various third-party obligations and commitments. We are required to assess the likelihood of any adverse judgments or outcomes to these matters, as well as potential ranges of probable losses. A determination of the amount of reserves required for these contingencies, if any, which would be charged to earnings, is made after careful analysis of each individual matter. The required reserves may change in the future due to new developments in each matter or changes in circumstances, such as a change in settlement strategy. Changes in required reserves could increase or decrease our earnings in the period the changes are made.

Recent Accounting Pronouncements

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” SFAS No. 157 clarifies the definition of fair value, establishes a framework for measuring fair value and expands the disclosures on fair value measurements. In February 2008, the FASB issued two FSPs amending SFAS No. 157. FSP SFAS 157-1 amends SFAS No. 157 to exclude SFAS No. 13, “Accounting for Leases,” and its related interpretive accounting pronouncements that address leasing transactions. FSP SFAS 157-2 delays the effective date of SFAS No. 157 until fiscal years beginning after November 15, 2008 for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. We adopted SFAS No. 157 on January 1, 2008, except for the items covered by FSP SFAS 157-2.

SFAS No. 157 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

• Level 1: Observable inputs, such as quoted prices in active markets for identical assets or liabilities;

• Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and

• Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.

Our marketable securities are reported at fair value on our consolidated balance sheet based on quoted prices in active markets for identical or comparable assets (Level 1). See Note 2 to our Consolidated Financial Statements.

On February 15, 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities.” Under this standard, we may elect to report cost and equity partner companies, marketable securities, hedges and certain other items at fair value on a contract-by-contract basis with changes in value reported in earnings. This election is irrevocable. SFAS No. 159 is effective for us for the fiscal year beginning January 1, 2008. We have elected not to apply the fair value option to any of our current eligible financial assets and liabilities.

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In December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business Combinations.” SFAS No. 141(R) amends the principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. SFAS No. 141(R) is effective for our fiscal year beginning on January 1, 2009, and we will apply prospectively to all business combinations subsequent to our effective date.

In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements—an amendment of Accounting Research Bulletin No. 51.” SFAS No. 160 establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 also establishes disclosure requirements that clearly identify and distinguish between the controlling and noncontrolling interests and requires the separate disclosure of income attributable to controlling and noncontrolling interests. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, which is our fiscal year beginning January 1, 2009. We are currently evaluating the impact that the adoption of SFAS No. 160 will have on our consolidated financial statements.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities—an amendment of SFAS No. 133.” SFAS No. 161 is intended to improve financial reporting of derivative instruments and hedging activities by requiring enhanced disclosures to enable financial statement users to better understand the effects of derivatives and hedging on an entity’s financial position, financial performance and cash flows. The provisions of SFAS No. 161 are effective for interim periods and fiscal years beginning after November 15, 2008, which is our fiscal year beginning January 1, 2009. We are currently evaluating the impact the adoption of SFAS No. 161 will have on our consolidated financial statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to equity price risks on the marketable portion of our equity securities. Our public holdings at March 31, 2008 include equity positions in companies in sectors that have experienced significant historical volatility in their stock prices. A 20% adverse change in equity prices, based on a sensitivity analysis of our public holdings as of March 31, 2008, would result in approximately a $14 million decrease in the fair value of our public holdings. Through March 31, 2008, the Company has entered into cashless collar contracts with various expiration dates in 2010 to hedge 1,625,000 shares of its total holdings of 2,187,060 shares of Blackboard common stock at weighted average minimum and maximum prices per share of $24.27 and $56.35, respectively. Each of these contracts limits the Company’s exposure to price declines in the underlying equity securities. Additionally, each of these contracts limits the Company’s maximum benefits from price increases in the underlying equity securities.

Cash and cash equivalents, accounts receivable and accounts payable are carried at cost, which approximates fair value due to the short-term maturity of these instruments. Marketable securities are carried at fair value.

We have historically had very low exposure to changes in foreign currency exchange rates and, as such, have not used derivative financial instruments to manage foreign currency fluctuation risk.

ITEM 4. Controls and Procedures

Controls and Procedures

Management’s Quarterly Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15e and 15d-15e under the Securities Exchange Act of 1934, as amended) as of the end of the period covered in this Report. Based upon that evaluation, the

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Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this Report, our disclosure controls and procedures are effective to provide reasonable assurance that information required to be included in the Company’s periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Inherent Limitations on Effectiveness of Controls

The design of any system of control is based upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all future events, no matter how remote, that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may not deteriorate. Because of their inherent limitations, systems of control may not prevent or detect all misstatements. Accordingly, even effective systems of control can provide only reasonable assurance of achieving their control objectives.

Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the quarter covered by this Report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

In May and June 2001, certain of the Company’s present directors, along with the Company, certain of its former directors, certain of its present and former officers and its underwriters, were named as defendants in nine class action complaints filed in the United States District Court for the Southern District of New York. The plaintiffs and the putative classes they seek to represent include present and former stockholders of the Company. The complaints generally allege violations of Sections 11 and 12 of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 10b-5 promulgated under the Exchange Act, based on, among other things, the dissemination of statements allegedly containing material misstatements and/or omissions concerning the commissions received by the underwriters of the initial public offering and follow-on public offering of the Company as well as failure to disclose the existence of purported agreements by the underwriters with some of the purchasers in these offerings to buy additional shares of the Company’s stock subsequently in the open market at pre-determined prices above the initial offering prices. The plaintiffs seek for themselves and the alleged class members an award of damages and litigation costs and expenses. The claims in these cases have been consolidated for pre-trial purposes (together with claims against other issuers and underwriters) before one judge in the Southern District of New York federal court. In April 2002, a consolidated, amended complaint was filed against these defendants which generally alleges the same violations and also refers to alleged misstatements or omissions that relate to the recommendations regarding the Company’s stock by analysts employed by the underwriters. In June and July 2002, defendants, including the Company defendants, filed motions to dismiss plaintiffs’ complaints on numerous grounds. The Company’s motion was denied in its entirety in an opinion dated February 19, 2003. In July 2003, a committee of the Company’s Board of Directors approved a proposed settlement with the plaintiffs in this matter, which was preliminarily approved by the District Court overseeing the litigation in February 2005. A final fairness hearing on the settlement was held on April 24, 2006. On December 5, 2006, however, the Second Circuit Court of Appeals reversed the certification of plaintiff classes in six actions related to other issuers that had been designated as test cases with respect to the non-settling defendants in those matters (the “Focus Cases”) and made other rulings that drew into question the legal viability of the claims in the Focus Cases. The Court of Appeals later rejected the plaintiffs’ request that it reconsider that decision. As a result, on June 25, 2007, the District Court approved a stipulation and order terminating the proposed settlement. In addition, the Court has issued an order applying the appellate decision made with respect to the Focus Cases to all other cases, including the consolidated action against the Company (the “Remaining Cases”). On August 14, 2007, the plaintiffs filed an amended “master” complaint containing allegations purportedly common to

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all defendants in all actions and filed amended complaints containing specific allegations against the six issuer defendants in the Focus Cases. In addition, on September 27, 2007, the plaintiffs again moved to certify classes in each of the Focus Cases. The defendants in the Focus Cases have moved to dismiss the amended complaints. On March 26, 2008, the District Court granted in part and denied in part those defendants’ motion to dismiss. The motion to certify the Focus Cases as class actions remains outstanding. The Court has approved a stipulation extending the time within which the plaintiffs must file amended pleadings containing specific allegations against the other issuer defendants, including the Company, and the time within which those defendants must move, answer or otherwise respond to those specific allegations. Counsel for plaintiffs have indicated an interest in commencing discovery in the Remaining Cases, but the scope and timetable for any such discovery, including discovery relating to the consolidated action against the Company, has not yet been determined.

ITEM 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3. Defaults Upon Senior Securities

None.

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

None.

ITEM 5. Other Information

None.

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ITEM 6. Exhibits

Exhibit Index

Exhibit Number	Document
10.1	Form of Loan Agreements, each dated as of May 8, 2008, by and between ICG Holdings, Inc. and with Credit Suisse Capital LLC.
10.2	Form of Promissory Note by ICG Holdings, Inc. in favor of Credit Suisse Capital LLC.
11.1	Statement Regarding Computation of Per Share Earnings (included herein at Note 11-“Net Income (Loss) per Share” to the Consolidated Financial Statements).
31.1	Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
31.2	Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32.1	Certification of the Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
32.2	Certification of the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Security Exchange Act of 1934, the Company has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 12, 2008

INTERNET CAPITAL GROUP, INC.
By:	/s/ R. Kirk Morgan
	Name:	R. Kirk Morgan
	Title:	Chief Financial Officer (Principal Financial and Accounting Officer)

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