Actua (ACTA) 10-Q 2010 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended March 31, 2010.

or

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

For the Transition Period from                    to                    .

Commission File Number 001-16249

INTERNET CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or 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 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. Yesþ Noo

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yeso Noo

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

Large accelerated filero Accelerated filerþ Non-accelerated filero Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso Noþ

The number of shares of the Company’s Common Stock, $0.001 par value per share, outstanding as of May 3, 2010 was 36,442,917 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, 2010 (unaudited) and December 31, 2009		6
Consolidated Statements of Operations (unaudited)—Three Months Ended March 31, 2010 and 2009		7
Consolidated Statements of Cash Flows (unaudited)—Three Months Ended March 31, 2010 and 2009		8
Notes to Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
Item 3. Quantitative and Qualitative Disclosures About Market Risk		39
Item 4. Controls and Procedures		40
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		41
Item 1A. Risk Factors		42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		43
Item 3. Defaults Upon Senior Securities		43
Item 4. (Removed and Reserved)		43
Item 5. Other Information		43
Item 6. Exhibits		44
Signatures		45
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

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

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

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

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

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Forward-Looking Statements

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

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

• economic conditions generally;

• capital spending by our partner companies’ customers;

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

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

• our ability to deploy capital effectively and on acceptable terms;

• our ability to maximize value in connection with divestitures;

• our ability to retain key personnel; and

• our ability to have continued access to capital and to manage capital resources effectively.

In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue” or the negative of such terms or other similar expressions. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements included in this Report. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this Report might not occur. For a more detailed discussion of some of the foregoing risks and uncertainties, see Item 1A — “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009, as well as other reports and registration statements filed by us with the SEC.

Our Partner Companies

The results of operations of our partner companies are reported within two segments: the “core” reporting segment and the “venture” (formerly “other holdings”) reporting segment. The core reporting segment includes those partner companies accounted for under the consolidated and equity methods in which ICG owns a principal controlling equity voting interest (52% on average as of March 31, 2010) and in which ICG’s management takes a very active role in providing strategic direction and management assistance. We expect to devote relatively large initial amounts of capital to acquire our core partner companies. The venture reporting segment includes partner companies to which we generally devote less capital than we do to our core companies and, therefore, in which we hold relatively smaller ownership stakes than we do in our core companies (24% on average as of March 31, 2010) and have less influence over their strategic direction and management decisions than we do over those of our core companies.

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At March 31, 2010, our consolidated core partner companies consisted of:

GovDelivery Holdings, Inc. (“GovDelivery”)

GovDelivery is a provider of government-to-citizen communication solutions. GovDelivery’s digital subscription management software as a service (“SaaS”) platform enables government organizations to provide citizens with access to relevant information by delivering new information through e-mail, mobile text alerts, RSS and social media channels from U.S. and U.K. government entities at the national, state and local levels.

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. (“InvestorForce”)

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

At March 31, 2010, our equity method core partner companies consisted of:

Channel Intelligence, Inc. (“Channel Intelligence”)

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

Freeborders, Inc. (“Freeborders”)

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

Metastorm Inc. (“Metastorm”)

Metastorm is a software and service provider of enterprise architecture modeling, business process analysis and business process management software for commercial enterprises and federal and state government organizations. This comprehensive suite of software products enables customers to understand, analyze, automate and continually improve their business processes.

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StarCite, Inc. (“StarCite”)

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

WhiteFence, Inc. (“WhiteFence”)

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

At March 31, 2010, our venture partner companies consisted of:

Acquirgy, Inc. (“Acquirgy”)

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

Anthem Ventures Fund, L.P. (“Anthem”)

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

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

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

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

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

SeaPass Solutions Inc. (“SeaPass”)

SeaPass develops and markets processing solutions that enable insurance carriers, agents and brokers to transmit and receive data in real-time by leveraging existing systems to interact automatically. With the company’s technology, information accessed in real-time allows for increased efficiency across all lines of the insurance business.

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PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

INTERNET CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
	2010			2009
	(Unaudited)
	(in thousands, except per share data)
Assets
Current Assets
Cash and cash equivalents	$	84,716		$	55,481
Restricted cash		71			47
Accounts receivable, net of allowance ($611-2010; $590-2009)		20,181			19,411
Deferred tax assets		8,140			8,147
Income tax receivable		11,071			11,071
Prepaid expenses and other current assets		2,193			2,183
Total current assets		126,372			96,340
Marketable securities		34,656			73,512
Hedges of marketable securities		155			—
Fixed assets, net of accumulated depreciation and amortization ($12,772-2010; $12,086-2009)		4,756			4,177
Ownership interests in partner companies		91,371			97,777
Goodwill		20,588			20,588
Intangibles, net		15,576			15,940
Deferred tax assets		20,126			20,724
Other assets, net		1,055			1,029
Total Assets	$	314,655		$	330,087
Liabilities
Current Liabilities
Current maturities of long-term debt	$	569		$	381
Accounts payable		1,714			1,656
Accrued expenses		3,752			4,464
Accrued compensation and benefits		4,869			12,227
Deferred revenue		6,534			5,912
Total current liabilities		17,438			24,640
Long-term debt		748			645
Hedges of marketable securities		—			547
Deferred revenue		—			83
Other		978			1,010
Total Liabilities	$	19,164		$	26,925
Equity
Internet Capital Group, Inc.’s Stockholders’ Equity
Preferred Stock, $0.01 par value; 10,000 shares authorized, none issued or outstanding		—			—
Common Stock, $0.001 par value; 2,000,000 shares authorized, 38,864 (2010) and 38,796 (2009) issued		39			39
Additional paid-in capital		3,574,354			3,573,347
Treasury Stock, at cost, 2,440 (2010) and 2,440 (2009) shares		(12,031	)		(12,031	)
Accumulated deficit		(3,323,117	)		(3,351,888	)
Accumulated other comprehensive income		33,518			71,198
Total Internet Capital Group, Inc.’s Stockholders’ Equity		272,763			280,665
Noncontrolling Interest		22,728			22,497
Total Equity		295,491			303,162
Total Liabilities and Equity	$	314,655		$	330,087

See accompanying notes to Consolidated Financial Statements.

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INTERNET CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended
	March 31,
	2010			2009
	(in thousands, except per
	share data)
Revenues	$	26,294		$	21,652
Operating expenses
Cost of revenue		16,932			13,205
Selling, general and administrative		10,719			9,216
Research and development		2,424			2,648
Amortization of intangible assets		364			77
Impairment related and other		72			30
Total operating expenses		30,511			25,176
		(4,217	)		(3,524	)
Other income (loss), net		40,296			(2,247	)
Interest income		61			142
Interest expense		(44	)		(84	)
Income (loss) before income taxes, equity loss and noncontrolling interest		36,096			(5,713	)
Income tax (expense) benefit		(616	)		53
Equity loss		(6,335	)		(4,953	)
Net income (loss)		29,145			(10,613	)
Less: Net income attributable to the noncontrolling interest		374			392
Net income (loss) attributable to Internet Capital Group, Inc.	$	28,771		$	(11,005	)
Basic income (loss) per share:
Net income (loss) attributable to Internet Capital Group, Inc.	$	0.79		$	(0.30	)
Shares used in computation of basic income (loss) per share		36,305			36,676
Diluted income (loss) per share:
Net income (loss) attributable to Internet Capital Group, Inc.	$	0.79		$	(0.30	)
Shares used in computation of diluted income (loss) per share		36,346			36,676

See accompanying notes to Consolidated Financial Statements.

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INTERNET CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Three Months Ended
	March 31,
	2010			2009
	(in thousands)
Operating Activities
Net income (loss)	$	29,145		$	(10,613	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization		916			482
Impairment related and other		72			9
Equity-based compensation		787			1,348
Equity loss		6,335			4,953
Other (income) loss		(40,296	)		2,193
Deferred income taxes		606			—
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		(874	)		813
Prepaid expenses and other assets		(62	)		877
Accounts payable		58			(59	)
Accrued expenses		288			(4,078	)
Accrued compensation and benefits		(7,963	)		(2,208	)
Deferred revenue		539			(1,083	)
Other liabilities		94			127
Cash flows provided by (used in) operating activities		(10,355	)		(7,239	)
Investing Activities
Capital expenditures, net		(1,137	)		(1,500	)
Advanced deposits for acquisition of fixed assets		—			(216	)
Change in restricted cash		(24	)		(3,584	)
Proceeds from sales of marketable securities		41,027			604
Proceeds from sales of partner company ownership interests		102			958
Acquisitions of ownership interests in partner companies		—			(1,426	)
Cash flows provided by (used in) investing activities		39,968			(5,164	)
Financing Activities
Long-term debt and capital lease obligations, net		(277	)		(110	)
Purchase of treasury stock		—			(370	)
Other financing activities		14			—
Cash flows provided by (used in) financing activities		(263	)		(480	)
Net increase (decrease) in Cash and Cash Equivalents		29,350			(12,883	)
Effect of exchange rates on cash		(115	)		(49	)
Cash and Cash Equivalents at beginning of period		55,481			89,295
Cash and Cash Equivalents at the end of period	$	84,716		$	76,363

See accompanying notes to Consolidated Financial Statements.

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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 SaaS, technology-enabled business process outsourcing (“BPO”) and Internet marketing companies that improve the productivity and efficiency of their business customers. Founded in 1996, the Company devotes its expertise and capital to maximizing the success of these companies.

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

2. Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements are unaudited and, in the opinion of management, include all adjustments consisting only of normal and recurring adjustments necessary for a fair presentation of the results for these interim periods. These Consolidated Financial Statements should be read in connection with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. Results of operations for the three-month period ended March 31, 2010 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”).

The Consolidated Statements of Operations include the results of the following majority-owned subsidiaries:

Three Months Ended March 31,
2010	2009
GovDelivery(1)	ICG Commerce
ICG Commerce	InvestorForce
InvestorForce	Vcommerce(2)

The Consolidated Balance Sheets include the financial position of the following majority-owned subsidiaries at March 31, 2010 and December 31, 2009:

March 31, 2010	December 31, 2009
GovDelivery(1)	GovDelivery(1)
ICG Commerce	ICG Commerce
InvestorForce	InvestorForce

(1)	On December 31, 2009, the Company acquired an 89% equity voting interest in GovDelivery. Accordingly, GovDelivery’s results were included in the Company’s Consolidated Statement of Operations subsequent to this date. See Note 3, “Ownership Interests in Partner Companies, Goodwill and Intangibles, net.”
(2)	On August 28, 2009, substantially all of Vcommerce’s assets were sold to Channel Intelligence. Accordingly, Vcommerce is not included in the Company’s Consolidated Financial Statements subsequent to that date. See Note 3, “Ownership Interests in Partner Companies, Goodwill and Intangibles, net.”

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

2. Significant Accounting Policies — (Continued)

Principles of Accounting for Ownership Interests in Partner Companies

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

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

Equity Method.Partner companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to a partner company depends on an evaluation of several factors, including, among others, representation on the partner company’s board of directors and ownership level, which is generally between a 20% and a 50% interest in the voting securities of the partner company, as well as voting rights associated with the Company’s holdings in common stock, preferred stock and other convertible instruments in the partner company. Under the equity method of accounting, a partner company’s accounts are not reflected within the Company’s Consolidated Balance Sheets and Statements of Operations. The Company’s share of the earnings or losses of the partner company, as well as any adjustments resulting from prior period finalizations of equity income/losses, are reflected in the caption “Equity loss” in the Consolidated Statements of Operations. For the three months ended March 31, 2010, those prior period finalizations are not material. The carrying values of the Company’s equity method partner companies are reflected in “Ownership interests in partner companies” in the Company’s Consolidated Balance Sheets.

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

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

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

2. Significant Accounting Policies — (Continued)

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

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. These estimates include evaluation of the Company’s holdings in its partner companies, holdings in marketable securities, asset impairment, revenue recognition, income taxes and commitments and contingencies. These estimates and assumptions are based on management’s best judgments. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, which management believes to be reasonable under the circumstances. Management adjusts such estimates and assumptions when facts and circumstances dictate. Volatile equity markets and reductions in information technology spending have combined to increase the uncertainty inherent in such estimates and assumptions. It is reasonably possible that the Company’s accounting estimates with respect to the useful life of intangible assets and the ultimate recoverability of ownership interests in partner companies and goodwill could change in the near term and that the effect of such changes on the Company’s financial statements could be material. The Company believes the recorded amount of ownership interests in partner companies and goodwill is not impaired at March 31, 2010.

Ownership Interests in Partner Companies, Goodwill and Intangibles, net

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

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

The Company’s policy is to perform ongoing business reviews for all partner companies and goodwill impairment tests annually in the fourth quarter of each year, or more frequently if conditions warrant. The Company recorded total impairments of $5.4 million during the year ended December 31, 2009. Of this amount, $4.9 million was related to the impairment of goodwill associated with Vcommerce, which was recorded during the second and third quarters of 2009, and the remaining $0.5 million was a reduction to the Company’s basis in GoIndustry, which was recorded during the first quarter of 2009 and is included in “Equity loss” on the Company’s Statement of Operations for the three months ended March 31, 2009. During the three months ended March 31, 2010, the Company recorded an additional impairment of $2.9 million due to further declines in the fair value of the Company’s equity holdings in GoIndustry that the Company believes are other than temporary. This impairment charge was recorded as a reduction to the Company’s basis in GoIndustry and is included in “Equity loss” on the Company’s Statement of Operations for the three months ended March 31, 2010. At March 31, 2010, the Company’s carrying value of its ownership interests in partner companies totaled $91.4 million, goodwill totaled $20.6 million and intangibles, net totaled $15.6 million. See Note 3, “Ownership Interest in Partner Companies, Goodwill and Intangibles, net” for additional information regarding our ownership interest in partner companies, goodwill and net intangible assets, as well as related impairment charges.

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

2. Significant Accounting Policies — (Continued)

Revenue Recognition

During the three months ended March 31, 2010, the Company’s consolidated revenues were primarily attributable to ICG Commerce and GovDelivery. During the three months ended March 31, 2009, the Company’s consolidated revenues were primarily attributable to ICG Commerce and Vcommerce.

ICG Commerce generates revenue from sourcing consulting and procurement outsourcing services. Procurement outsourcing services generally include a combination of services and technology designed to help companies achieve unit cost savings and process efficiencies. ICG Commerce earns fees for implementation services, start-up services, content and category management (which may include sourcing as described below), hosting fees, buying center management fees, and certain transaction fees. ICG Commerce estimates the total contract value under these arrangements and generally recognizes revenue under these arrangements, excluding transaction fees and gain-share fees, on a straight-line basis over the term of the contract, which approximates the life of the customer relationship. Additionally, performance based/gain share fees are deferred until the contingency is achieved or it is determined from existing data and past experience that the savings will be achieved, and then generally recognized on a straight-line basis over the life of the contract, which approximates the life of the customer relationship. Sourcing programs are engagements in which ICG Commerce negotiates prices from certain suppliers on behalf of its customers in certain categories in which ICG Commerce has sourcing expertise. Under sourcing programs, either the customer pays a fixed-fee or a gain-share amount for use of the negotiated rates. In fixed-fee sourcing arrangements, revenue is recognized on a proportional performance basis, provided that there is no uncertainty as to ICG Commerce’s ability to fulfill its obligations under the contract or other services that are to be rendered under the contract. Gain-share sourcing revenue is recognized when earned.

GovDelivery revenues generally consist of nonrefundable set-up fees and monthly maintenance and hosting fees. These fees are deferred and recognized as the services are performed, which is typically over the service term. Costs related to performing set-up services are expensed as incurred. Revenue from labor law posters are recognized upon delivery provided a purchase order has been received, the price to the buyer is fixed or determinable and collectibility is reasonably assured. Revenues from update and subscription services for labor law posters are deferred and recognized ratably over the service term.

Vcommerce generated revenue from service fees earned in connection with the development and operation of its clients’ e-commerce businesses. Service fee revenue primarily consisted of transaction fees, implementation fees and professional services, as well as access and maintenance fees. Vcommerce recognized revenue from services provided when the following revenue recognition criteria were met: persuasive evidence of an arrangement existed, services had been rendered, the fee was fixed or determinable and collectibility is reasonably assured. Generally, Vcommerce recognized revenue related to implementation as well as access and maintenance services over the term of the customer contract, and transaction fees and professional services as services were rendered.

12

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

2. Significant Accounting Policies — (Continued)

Concentration of Customer Base and Credit Risk

For the three months ended March 31, 2010, two customers of ICG Commerce, The Hertz Corporation (“Hertz”) and Kimberly-Clark Corporation (“Kimberly-Clark”), represented approximately 11% and 12%, respectively, of ICG’s consolidated revenue. For the three months ended March 31, 2009, those customers each represented approximately 14% of ICG’s consolidated revenue. Accounts receivable from Hertz and Kimberly-Clark as of March 31, 2010 were $2.5 million and $1.3 million, respectively. Accounts receivable from Hertz and Kimberly-Clark as of December 31, 2009 were $1.7 million and $1.5 million, respectively. The accounts receivable balances as of March 31, 2010 for these customers included $0.2 million and $0.1 million, respectively, of unbilled accounts receivable. The accounts receivable balances as of December 31, 2009 for these customers included $0.2 million and $0.1 million, respectively, of unbilled accounts receivable.

Recent Accounting Pronouncements

In February 2010, the FASB issued amended guidance that requires an SEC reporting company to evaluate subsequent events through the date that the financial statements are issued, but no longer requires the SEC reporting company to disclose the date through which subsequent events are evaluated. This guidance became effective for the Company upon issuance and did not have a significant impact on its consolidated financial statements.

In January 2010, the FASB issued amended guidance requiring additional fair value disclosures related to inputs and valuation techniques used to measure fair value as well as disclosures about significant transfers between levels in the hierarchy of fair value measurement. This guidance became effective for the Company beginning on January 1, 2010 and did not have a significant impact on its consolidated financial statements.

In October 2009, the FASB issued accounting guidance related to revenue recognition for transactions with multiple deliverables, which impacts the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. This guidance is effective for the Company beginning on January 1, 2011. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements.

In October 2009, the FASB issued accounting guidance related to certain revenue arrangements that include software elements, which amends the scope of pre-existing software revenue guidance. This guidance is effective for the Company beginning on January 1, 2011. The Company is currently evaluating the effect this guidance will have on its consolidated financial statements.

In June 2009, the FASB issued accounting guidance that requires former “qualifying special-purpose entities” to be evaluated for consolidation, changes the approach to determining a variable interest entity’s primary beneficiary and revises the frequency with which reassessments of this determination should be made, and requires additional disclosures related to these items. This guidance became effective for the Company beginning on January 1, 2010 and did not have a significant impact on the Company’s Consolidated Financial Statements.

13

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

3. Ownership Interests in Partner Companies, Goodwill and Intangibles, net

The Company’s ownership interests in partner companies accounted for under the equity method were $91,371 and $97,777 as of March 31, 2010 and December 31, 2009, respectively. The Company’s ownership interests in partner companies accounted for under the cost method that are not public companies (marketable securities) was zero as of March 31, 2010 and December 31, 2009.

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

	(in thousands)
Goodwill as of December 31, 2009	$	20,588
Activity during the three months ended March 31, 2010		—
Goodwill as of March 31, 2010	$	20,588

As of March 31, 2010 and December 31, 2009, all of the Company’s goodwill was allocated to the core reporting segment.

The following table summarizes the Company’s intangible assets (in thousands):

		As of March 31, 2010
		Gross Carrying		Accumulated			Net Carrying
Intangible Assets	Useful Life	Amount		Amortization			Amount
Customer relationships	11 years	$	13,910	$	(316	)	$	13,594
Trademarks/trade names	11 years		1,320		(30	)		1,290
Technology	10 years		710		(18	)		692
		$	15,940	$	(364	)	$	15,576

		As of December 31, 2009
		Gross Carrying		Accumulated		Net Carrying
Intangible Assets	Useful Life	Amount		Amortization		Amount
Customer relationships	11 years	$	13,910	$	—	$	13,910
Trademarks/trade names	11 years		1,320		—		1,320
Technology	10 years		710		—		710
		$	15,940	$	—	$	15,940

Amortization expense for the three months ended March 31, 2010 and 2009 was $0.4 million and $0.1 million, respectively. The Company amortizes intangible assets using the straight-line method.

Remaining estimated amortization expense is as follows:

	(in thousands)
2010 (remaining nine months)	$	1,092
2011	$	1,456
2012	$	1,456
2013	$	1,456
2014	$	1,456
Thereafter	$	8,660
Remaining amortization expense	$	15,576

14

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

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

Acquisitions — Consolidated Companies

On December 31, 2009, the Company acquired 89% of the equity of GovDelivery, which was accounted for under the acquisition method. The Company has allocated the purchase price to the assets and the liabilities based upon their respective fair values at the date of acquisition, which are as follows:

	GovDelivery
	(in thousands)
Net assets acquired:
Goodwill	$	3,644
Customer lists (11 year life)		13,910
Trademarks/trade names (11 year life)		1,320
Technology (10 year life)		710
Other net assets (liabilities)		1,506
		21,090
Noncontrolling interest(1)		(1,420	)
	$	19,670

⁽¹⁾ The Company determined the noncontrolling interest of GovDelivery with consideration of discounts for lack of control and lack of marketability.

Since GovDelivery was acquired on December 31, 2009, no results of GovDelivery’s operations are included in the Company’s Consolidated Statement of Operations for the three months ended March 31, 2009. Revenue, net income (loss) attributable to Internet Capital Group, Inc. and net income (loss) per basic and diluted share attributable to Internet Capital Group, Inc. would have been $23.9 million, $(11.3) million and $(0.31) per diluted share, respectively, for the three months ended March 31, 2009, had the Company owned 89% and consolidated GovDelivery for that period.

Subsequent to the quarter ended March 31, 2010, the Company acquired an additional 12% equity voting interest in ICG Commerce from an existing stockholder of ICG Commerce for aggregate cash consideration of approximately $35.3 million. As a result of this acquisition, which was consummated on May 5, 2010, the Company increased its voting ownership interest in ICG Commerce from 64% to 76%. The Company will complete a purchase price allocation with respect to this acquisition.

Equity Method Companies

The following unaudited summarized financial information relates to the Company’s partner companies accounted for under the equity method of accounting as of March 31, 2010 and December 31, 2009. This aggregate information has been compiled from the financial statements and capitalization tables of the Company’s individual equity method partner companies.

Balance Sheets (Unaudited) ⁽¹⁾

	March 31, 2010		December 31, 2009
	(in thousands)
Cash, cash equivalents and short-term investments	$	53,641	$	72,469
Other current assets		56,204		60,186
Other non-current assets		161,910		157,455
Total assets	$	271,755	$	290,110
Current liabilities	$	104,992	$	122,762
Non-current liabilities		11,528		11,192
Long-term debt		23,446		15,117
Stockholders’ equity		131,789		141,039
Total liabilities and stockholders’ equity	$	271,755	$	290,110
Total carrying value	$	91,371	$	97,777

⁽¹⁾ Includes Acquirgy (25%), Channel Intelligence (50%), ClickEquations (33%), Freeborders (31%), GoIndustry (26%), Metastorm (33%), SeaPass (26%), StarCite (36%) and WhiteFence (36%) for both periods presented. The Company does not consolidate Channel Intelligence since the Company’s ownership of this partner company does not exceed 50% (49.5%) and additional factors support that the Company does not exert control over Channel Intelligence.

15

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

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

At March 31, 2010, the Company’s aggregate carrying value in equity method partner companies exceeded the Company’s share of net assets of these equity partner companies by approximately $50.0 million. Of this excess, $36.6 million is allocated to goodwill, which is not amortized, and $13.4 million is allocated to intangibles, which are generally amortized over a range of three to seven years. Amortization expense associated with these intangibles was $0.7 million and $0.5 million for the three months ended March 31, 2010 and 2009, respectively. This amortization expense is included in the line item “Equity loss excluding impairments” in the following table and in the line item “Equity loss” on the Company’s Consolidated Statements of Operations.

Results of Operations (Unaudited)

	Three Months Ended March 31,
	2010(1)			2009(2)
	(in thousands)
Revenue	$	57,152		$	55,252
Net income (loss)	$	(8,266	)	$	(11,173	)
Equity loss excluding impairments and amortization of intangibles	$	(2,714	)	$	(3,956	)
Impairment charge of GoIndustry		(2,914	)		(544	)
Amortization of intangible assets		(707	)		(453	)
Total equity loss	$	(6,335	)	$	(4,953	)

(1)	Includes Acquirgy, Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm, SeaPass, StarCite and WhiteFence.
(2)	Includes Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm, StarCite and WhiteFence.

Other Equity Company Information

In January 2009, the Company purchased $1.4 million of convertible long-term notes from GoIndustry. In September 2009, in conjunction with a financing transaction, these long-term notes were converted to 56,952,636 shares of GoIndustry common stock and the Company purchased an additional 63,888,889 shares of GoIndustry common stock for approximately $1.9 million. In February 2010, GoIndustry issued shares of common stock as holdback consideration in connection with an acquisition in February 2008. As a result of this issuance, the Company’s ownership interest in GoIndustry was reduced slightly. The reduction in the Company’s ownership in GoIndustry was accounted for as a disposition of shares and resulted in a dilution loss of $0.1 million during the three months ended March 31, 2010, which was recorded in “Other income (loss), net” on the Company’s Consolidated Statements of Operations. As of March 31, 2010 and December 31, 2009, the Company owned 254,674,377 shares of GoIndustry common stock, or approximately 26% of the outstanding shares, as compared to 133,832,852 shares of GoIndustry common stock, or approximately 29% of the outstanding shares as of March 31, 2009. Due to the Company’s 26% ownership, GoIndustry continues to be accounted for under the equity method.

Impairment charges of $2.9 million and $0.5 million were recorded by the Company during the three months ended March 31, 2010 and 2009, respectively, to reduce the Company’s basis in GoIndustry as a result of declines in the fair value of the Company’s equity holdings in this partner company during the respective periods. The carrying value of the Company’s investment in GoIndustry was $2.5 million and $5.7 million as of March 31, 2010 and December 31, 2009, respectively.

16

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

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

Escrow Information

As of March 31, 2010, the Company had outstanding aggregate cash proceeds, subject to indemnity claims, of approximately $2.9 million associated with escrowed proceeds from sales of former equity method partner companies. Additionally, the Company had 13,689 outstanding shares of IntercontinentalExchange, Inc. (“ICE”) common stock, valued at approximately $1.5 million based on the March 31, 2010 closing stock price of ICE’s common stock, being held in escrow. These share escrows primarily relate to sale consideration that was set aside to satisfy potential purchase price adjustments and/or potential indemnity claims in connection with the sale of Creditex Group, Inc. (“Creditex”) to ICE on August 29, 2008. On March 1, 2010, 46,751 shares of ICE common stock were released from escrow to the Company. Accordingly, the Company recorded a gain of $5.0 million in “Other income (loss), net” on the Company’s Consolidated Statement of Operations based on the closing stock price of ICE’s common stock on March 1, 2010. Immediately following the receipt of these shares from escrow, the Company sold the shares for proceeds of $5.1 million and recognized an incremental gain of $0.1 million, which was also recorded in “Other income (loss), net” on the Company’s Consolidated Statements of Operations for the three months ended March 31, 2010. The release of additional escrowed proceeds, if any, to the Company would result in additional gains at the time the Company is entitled to such proceeds, the amount is fixed or determinable and realization is assured, which events are anticipated to occur at various times between June 2010 and August 2012.

4. Marketable Securities and Related Derivatives

Marketable securities represent the Company’s holdings in publicly-traded equity securities accounted for as available-for-sale securities. At March 31, 2010, the Company held a noncontrolling interest in Blackboard, Inc. (“Blackboard”), which is traded on the NASDAQ Global Market (NASDAQ: BBBB). The cost, unrealized holding gains/(losses), and fair value of marketable securities at March 31, 2010 and December 31, 2009 were as follows:

					Unrealized
	Common Shares				Holding
	Owned		Cost		Gains/(Losses)		Fair Value
			(in thousands, except shares)
March 31, 2010
Blackboard		831,866	$	1,204	$	33,452	$	34,656
December 31, 2009
Blackboard		1,619,571	$	2,342	$	71,170	$	73,512

The table above does not reflect the Company’s holdings of ICE common stock, which were both obtained and sold during the quarter ended March 31, 2010. See Note 3, “Ownership Interests in Partner Companies, Goodwill and Intangibles, net.”

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

During the three months ended March 31, 2010, the Company sold 787,705 shares of Blackboard common stock at an average price of $45.82 per share. The Company received total proceeds of $36.1 million and recognized a gain on the sale of these securities in the amount of $34.9 million. This gain is included in “Other income (loss), net” on the Company’s Consolidated Statements of Operations.

17

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

4. Marketable Securities and Related Derivatives — (Continued)

The Company manages its exposure to and benefits from price fluctuations of Blackboard common stock by using derivative securities or hedges. Although these instruments are derivative securities, their economic risks are similar to, and managed on the same basis as, the risks associated with the Blackboard shares the Company holds. As of March 31, 2010, the Company was party to cashless collar contracts with expiration dates between September 15, 2010 and October 15, 2010 to hedge 375,000 shares of its total holdings of 831,866 shares of Blackboard common stock at weighted average minimum and maximum prices per share of $28.49 and $63.99, respectively. During the three months ended March 31, 2010, the Company incurred costs of $0.2 million to terminate two cashless collar contracts related to a total of 250,000 shares and recorded a loss in this amount, which is included in “Other income (loss), net” on the Company’s Consolidated Statements of Operations. Additionally, two cashless collar contracts related to a total of 375,000 shares of Blackboard common stock matured during the three months ended March 31, 2010. Since Blackboard’s stock price on the maturity date was within the weighted average minimum and maximum prices per share, the value of the matured hedges were zero and there was no gain or loss associated with the maturity of these contracts.

In accordance with applicable accounting rules, the cashless collar contracts are marked to market through earnings each period. The mark-to-market impact to earnings of these instruments was a gain of $0.7 million for the three months ended March 31, 2010, and a loss of $3.5 million for the three months ended March 31, 2009. This impact is reflected in “Other income (loss), net” for the appropriate period on the Company’s Consolidated Statements of Operations.

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

	Mar 31,		Jun 30,		Sep 30,		Dec 31,		Mar 31,		Jun 30,		Sep 30,		Dec 31,		Mar 31,
	2008		2008		2008		2008		2009		2009		2009		2009		2010
Blackboard closing stock price	$	33.33	$	38.23	$	40.29	$	26.23	$	31.74	$	28.86	$	37.78	$	45.39	$	41.66

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

The fair value of these instruments was an asset of $0.2 million at March 31, 2010 and a liability of $0.5 million at December 31, 2009, and, in each period, is included in “Hedges of marketable securities” on the Company’s Consolidated Balance Sheets. See Note 5, “Financial Instruments.”

5.Financial Instruments

Derivative Financial Instruments

The Company utilizes derivative financial instruments, primarily the Blackboard security hedges and forward exchange contracts, to manage its exposure to and benefits from price fluctuations of Blackboard common stock and foreign currency risk, respectively. The cashless collar contracts related to Blackboard common stock are discussed in Note 4, “Marketable Securities and Related Derivatives.” In addition, during the three months ended March 31, 2010, ICG Commerce utilized put options to mitigate the risk of currency fluctuations at ICG Commerce’s operations in the United Kingdom and Europe. The net mark-to-market loss recognized by ICG Commerce was less than $0.1 million and represents the premium paid for the options. These losses were recognized in “Other income (loss), net” on the Company’s Consolidated Statements of Operations.

18

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

5.Financial Instruments — (Continued)

The following table presents the classifications and fair values of our derivative instruments as of March 31, 2010 and December 31, 2009:

Consolidated Balance Sheets
		March 31,		December 31,
Derivative	Classification	2010		2009
		(in thousands)
Cashless collar contracts	Hedges of marketable securities	$	155	$	(547	)
Foreign exchange put option	Other assets, net	$	21	$	—

The following table presents the mark-to-market impact on earnings resulting from our hedging activities for the three months ended March 31, 2010 and 2009:

Consolidated Statements of Operations
		Three months ended March 31,
Derivative	Classification	2010			2009
		(in thousands)
Cashless collar contracts	Other income (loss), net	$	702		$	(3,451	)
Foreign exchange put option	Other income (loss), net	$	(48	)	$	—

Fair Value Measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair value, which are as follows:

Level 1 — Observable inputs such as quoted market prices for identical assets and liabilities in active public markets.

Level 2 — Observable inputs other than Level 1 prices based on quoted prices in markets with insufficient volume or infrequent transactions, or valuations in which all significant inputs are observable for substantially the full term of the asset or liability.

Level 3 — Unobservable inputs to the valuation techniques that are significant to the fair value of the asset or liability.

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

	Balance at
	March 31,
	2010		Level 1		Level 2			Level 3
	(in thousands)
Cash equivalents (money market accounts)	$	85,267	$	85,267	$	—		$—
Marketable securities (see Note 4)		34,656		34,656		—		—
Hedges of marketable securities (see Note 5)		155		—		155	(1)	—
	$	120,078	$	119,923	$	155		$—

19

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

5.Financial Instruments — (Continued)

	Balance at
	December 31,
	2009			Level 1		Level 2				Level 3
	(in thousands)
Cash equivalents (money market accounts)	$	49,972		$	49,972	$	—		$	—
Marketable securities (see Note 4)		73,512			73,512		—			—
Hedges of marketable securities (see Note 5)		(547	)		—		(547	)(1)		—
	$	122,937		$	123,484	$	(547	)	$	—

⁽¹⁾ The Company’s respective counterparties under these arrangements provide the Company with quarterly statements of the market values of these instruments based on significant inputs that are observable or can be derived principally from, or corroborated by, observable market data for substantially the full term of the relevant asset or liability.

6. Debt

Long-Term Debt

The Company’s long-term debt of $1.3 million and $1.0 million as of March 31, 2010 and December 31, 2009, respectively, relates to its consolidated partner companies in the respective periods. The long-term debt as of March 31, 2010 is due as follows: $0.6 million is classified as current and is due within one year, and the remaining $0.7 million is due through 2014. The long-term debt as of December 31, 2009 was due as follows: $0.4 million was classified as current and was due within one year and the remaining $0.6 million was due through 2013.

Loan and Credit Agreements

On December 18, 2009, the Company entered into an amended and restated loan agreement with Comerica Bank (the “Loan Agreement”) that provides for the issuance of letters of credit of up to $10.0 million, subject to a cash-secured borrowing base as defined by the Loan Agreement. The Loan Agreement expires on December 17, 2010 and replaces the Letter of Credit Agreement, as amended, between the same parties, which expired on December 12, 2009. Issuance fees of 0.50% per annum of the face amount of each letter of credit will be paid to Comerica Bank subsequent to issuance. The Loan Agreement is also subject to a 0.25% per annum unused commitment fee payable to the bank on a quarterly basis. No amounts were outstanding under these agreements at March 31, 2010 or December 31, 2009.

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 375,000 of its shares of Blackboard common stock. The loans bear interest, which is payable quarterly in arrears, at the three-month U.S. dollar LIBOR rate, computed on the basis of a 30-day month and a 360-day year. This interest rate resets on the first day of each calendar quarter. The maturity of each of the loans corresponds with the expiration of the underlying cashless collar contract. Accordingly, the maturity dates of the loans range from September 15, 2010 to October 15, 2010. The maximum borrowing capacity under each of the loan agreements equals the present value of the minimum value of the underlying cashless collar contract, computed using the three month U.S. dollar LIBOR rate. The aggregate maximum borrowing capacity under the loan agreements was approximately $10.7 million as of March 31, 2010. The Company has not drawn any amounts under the loan agreements to date.

20

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

6. Debt — (Continued)

During 2009, ICG Commerce and a number of its wholly-owned subsidiaries were party to a loan agreement with PNC Bank, pursuant to which ICG Commerce and such subsidiaries were able to borrow up to $10.0 million under a revolving line of credit. The line of credit matured on December 31, 2009. On February 25, 2010, ICG Commerce and PNC Bank agreed to extend the line of credit to December 31, 2010. The credit facility is secured by the assets of the borrowing companies. Interest on any outstanding amounts is computed at a rate to be selected by ICG Commerce from the following: (1) the highest of PNC Bank’s prime rate, the sum of the Federal Funds Open Rates plus 0.5% or the sum of the daily LIBOR rate plus 1.0%, plus a margin of 0.75%, or LIBOR plus a margin of 1.75%, depending on the then-current debt-to-EBITDA ratio of the borrowing companies, and (2) the highest of PNC Bank’s prime rate, the sum of the Federal Funds Open Rates plus 0.5% or the sum of the daily LIBOR rate plus 1.0%, plus a margin of 1.0%, or LIBOR plus a margin of 2%, depending on the then-current debt-to-EBITDA ratio of the borrowing companies. The loan agreement also provides for the issuance by the bank of letters of credit, subject to specified fees and other terms. The loan agreement is subject to a 0.25% per annum unused commitment fee that is payable to the bank quarterly. There were no amounts outstanding under these agreements (including letters of credit) as of March 31, 2010 or December 31, 2009.

7. Segment Information

The Company’s reportable segments consist of two reporting segments, the “core” segment and the “venture” segment. At March 31, 2010, the core segment includes the results of the Company’s consolidated partner companies, 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 its core segment partner companies. At March 31, 2010, the venture segment 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 its venture segment partner companies. Marketable securities are considered “corporate” assets whereas, prior to becoming marketable securities, the partner company to which they relate would have been included in the core or venture category.

The core reporting segment includes those consolidated and equity method partner companies in which ICG owns a principal controlling equity voting interest (53% on average as of March 31, 2010) and in which ICG’s management takes a very active role in providing strategic direction and management assistance. The Company expects to devote relatively large initial amounts of capital to acquire core partner companies. The venture reporting segment includes partner companies in which the Company generally devotes less capital than it does to its core companies and, therefore, in which it holds relatively smaller ownership stakes than it does in its core companies (24% on average as of March 31, 2010) and has less influence over their strategic direction and management decisions than it does over those of its core companies.

Approximately 8% and 10% of the Company’s consolidated revenues for the three months ended March 31, 2010 and 2009, respectively, relate to sales generated in the United Kingdom. The remaining consolidated revenues for the three months ended March 31, 2010 and 2009 primarily relate to sales generated in the United States. As of March 31, 2010 and December 31, 2009, the Company’s assets were located primarily in the United States.

21

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

7. Segment Information — (Continued)

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

Segment Information
(in thousands)
							Total			Reconciling Items						Consolidated
	Core			Venture			Segment			Corporate			Other*			Results
Three Months Ended March 31, 2010
Revenues	$	26,294		$	—		$	26,294		$	—		$	—		$	26,294
Net income (loss) attributable to Internet Capital Group, Inc.	$	(2,929	)	$	(1,179	)	$	(4,108	)	$	(4,472	)	$	37,351		$	28,771
Three Months Ended March 31, 2009
Revenues	$	21,652		$	—		$	21,652		$	—		$	—		$	21,652
Net income (loss) attributable to Internet Capital Group, Inc.	$	(2,573	)	$	(1,125	)	$	(3,698	)	$	(4,476	)	$	(2,831	)	$	(11,005	)

*

	Three Months Ended March 31,
	2010			2009
Corporate other income (loss) (Note 10)	$	40,639		$	(1,895	)
Noncontrolling interest		(374	)		(392	)
Impairment of GoIndustry (Venture) (Note 3)		(2,914	)		(544	)
	$	37,351		$	(2,831	)

					Total						Consolidated
	Core		Venture		Segment		Corporate		Other		Results
Assets as of:
March 31, 2010	$	184,981	$	17,671	$	202,652	$	112,003	$	—	$	314,655
Assets as of:
December 31, 2009	$	192,786	$	21,832	$	214,618	$	115,469	$	—	$	330,087

22

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, 2010 and December 31, 2009 is included in “Ownership interests in partner companies” in the Parent Company Balance Sheets set forth below.

Parent Company Balance Sheets

	As of March 31, 2010		As of December 31, 2009
	(in thousands)
Assets
Cash and cash equivalents	$	64,755	$	29,443
Income tax receivable		11,071		11,071
Other current assets		453		562
Current assets		76,279		41,076
Ownership interests in partner companies		163,742		170,498
Marketable securities		34,656		73,512
Hedges of marketable securities		155		—
Other		913		881
Total assets	$	275,745	$	285,967
Liabilities and stockholders’ equity
Current liabilities	$	2,697	$	4,433
Hedges of marketable securities		—		547
Non-current liabilities		350		350
Stockholders’ equity		272,698		280,637
Total liabilities and stockholders’ equity	$	275,745	$	285,967

Parent Company Statements of Operations

	Three Months Ended
	March 31,
	2010			2009
	(in thousands)
Revenues	$	—		$	—
Operating expenses
General and administrative		4,524			4,600
Total operating expenses		4,524			4,600
		(4,524	)		(4,600	)
Other income (loss), net		40,639			(1,895	)
Interest income (expense), net		52			124
Income (loss) before income taxes and equity loss		36,167			(6,371	)
Equity loss		(7,396	)		(4,634	)
Net income (loss)	$	28,771		$	(11,005	)

23

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,
	2010			2009
	(in thousands)
Operating Activities
Net income (loss)	$	28,771		$	(11,005	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		16			31
Equity-based compensation		648			1,129
Equity loss		7,396			4,634
Other (income) loss		(40,639	)		1,895
Changes in assets and liabilities, net of effect of acquisitions:
Prepaid expenses and other assets		109			457
Accounts payable		17			(3	)
Accrued expenses		(58	)		203
Accrued compensation and benefits		(1,694	)		(2,150	)
Cash provided by (used in) operating activities		(5,434	)		(4,809	)
Investing Activities
Capital expenditures, net		(33	)		(5	)
Change in restricted cash		—			(3,585	)
Proceeds from sales of marketable securities		41,027			604
Proceeds from sales of ownership interests in partner companies		102			958
Acquisitions of ownership interests in partner companies, net		(350	)		(4,026	)
Cash provided by (used in) investing activities		40,746			(6,054	)
Financing Activities
Purchase of treasury stock		—			(370	)
Cash provided by (used in) financing activities		—			(370	)
Net increase (decrease) in cash and cash equivalents		35,312			(11,233	)
Cash and cash equivalents at beginning of period		29,443			73,208
Cash and cash equivalents at end of period	$	64,755		$	61,975

9. Equity-Based Compensation

Equity-based compensation for the three months ended March 31, 2010 and 2009 is primarily included in “Selling, general and administrative” on the Company’s Consolidated Statements of Operations for their respective periods. The following table provides additional information related to the Company’s equity-based compensation:

							Weighted Average Years
					Unrecognized		Remaining of Equity-
	Three Months Ended				Equity-Based		Based Compensation
	March 31,				Compensation at		Expense at March 31,
	2010		2009		March 31, 2010		2010
	(in thousands, except weighted average years)
SARs*	$	514	$	993	$	6,766		3.7
Stock Options		—		3		1		2.7
Restricted Stock		38		18		387		3.3
DSUs**		46		65		222		0.9
Equity-Based Compensation	$	598	$	1,079	$	7,376
Equity-Based Compensation for Consolidated Partner Companies		139		219		1,538		3.1
Equity-Based Compensation	$	737	$	1,298	$	8,914

*	Stock Appreciation Rights (“SARs”)
**	Deferred Stock Units (“DSUs”)

24

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

9. Equity-Based Compensation — (Continued)

SARs

SARs represent the right of the holder to receive, upon exercise of each SAR, shares of Common Stock equal to the amount by which the fair market value of a share of common stock on the date of exercise of the SAR exceeds the base price of the SAR. During the three months ended March 31, 2010, the Company granted 1,381,940 SARs to employees at a weighted-average base price of $6.74 per share and a weighted-average fair value of $4.07 per share. There were no SAR grants during the three months ended March 31, 2009. There were 5,352,310 and 3,970,370 SARs outstanding at March 31, 2010 and December 31, 2009, respectively. The aggregate intrinsic value of the SARs outstanding at March 31, 2010 and December, 31, 2009 was $6.1 million and $0, respectively.

SARs Fair Value Assumptions

The following assumptions were used to determine the fair value of SARs granted to employees by the Company:

	Three Months Ended March 31,
	2010	2009
Expected volatility	60%		—
Average expected life of SAR	2.75-6.25 years		—
Risk-free interest rate	1.55-2.92%		—
Dividend yield	0.0%		—

The Company estimates the grant date fair value of SARs using the Black-Scholes option-pricing model, which requires the input of highly subjective assumptions. These assumptions include estimating the expected life of the award and the estimated volatility of our stock price over the expected term. Expected volatility is based on historical volatility of our Common Stock over the period commensurate with the expected term of the award. The expected term calculation for SARs granted is based on an average of the SAR vest term and the life of the award. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for an instrument with a maturity that is commensurate with the expected term of the award. Changes in these assumptions, the estimated forfeitures and the requisite service period can materially affect the amount of equity-based compensation recognized in the Company’s Consolidated Statements of Operations.

Stock Options

The fair value of each stock option is estimated on the grant date using the Black-Scholes option-pricing model. Stock options generally vest over four years. During the three months ended March 31, 2010, 1,948 stock options expired. There were no stock options granted during the three months ended March 31, 2010 or 2009. There were 527,456 and 529,404 stock options outstanding as of March 31, 2010 and December 31, 2009, respectively.

Restricted Stock

During the three months ended March 31, 2010, the Company granted 25,000 shares of restricted stock to certain employees, which vest over four years. These restricted stock awards were valued at $0.2 million. There were no restricted stock awards granted during the three months ended March 31, 2009. There were 59,525 and 34,525 restricted stock awards outstanding at March 31, 2010 and December 31, 2009, respectively.

25

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

9. Equity-Based Compensation — (Continued)

DSUs

During the three months ended March 31, 2010, 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 2011. These DSUs were valued at $0.2 million. During the three months ended March 31, 2009, the Company issued 36,000 DSUs to the Company’s non-management directors under the Non-management Director Compensation Plan that vested during the three months ended March 31, 2010. These DSUs were valued at $0.1 million.

During the three months ended March 31, 2010 and 2009, the Company issued 7,364 DSUs and 8,803 DSUs, respectively, to the Company’s non-management directors in lieu of cash, payable to those directors for services provided to the Company’s Board of Directors and its committees. These DSUs vested immediately. The expense of $0.1 million for each of the three months ended March 31, 2010 and 2009 associated with the quarterly grants for service is included in “Selling, general and administrative” on the Company’s Consolidated Statements of Operations but is not included in the “Equity-Based Compensation” table above.

10. 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,
	2010			2009
	(in thousands)
Gain on sale of Creditex (Note 3)	$	5,053		$	430
Unrealized gain (loss) on mark-to-market of hedges (Note 4)		702			(3,451	)
Gains on sales/distributions of ownership interests in partner companies		102			958
Realized gains on marketable securities (Note 4)		34,835			174
Dilution loss on GoIndustry (Note 3)		(67	)		—
Other		14			(6	)
	$	40,639		$	(1,895	)
Total other income (loss) for consolidated partner companies		(343	)		(352	)
	$	40,296		$	(2,247	)

During the three months ended March 31, 2010 and 2009, the Company recorded gains of $0.1 million and $1.0 million, respectively, related to distributions of various ownership interests in former partner companies. These gains are included in “Gains on sales/distributions of ownership interests in partner companies” in the above table.

During each of the three months ended March 31, 2010 and 2009, ICG Commerce recorded foreign currency losses of approximately $0.3 million related to changes in exchange rates associated with its operations in the United Kingdom and Europe.

26

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

11. Income Taxes

The Company, InvestorForce and GovDelivery join in filing a consolidated federal income tax return. As a result of a change in ownership of the Company under Internal Revenue Code Section 382 that occurred in 2004, its net operating loss carryforwards, capital loss carryforwards and certain other deferred tax assets are subject to an annual limitation. The annual limitation on the utilization of these carryforwards is approximately $14.5 million. This annual limitation can be carried forward if it is not used. The Company did not use the limitation in 2009; therefore, the amount available for 2010 is $29 million. Together, excluding the results for the three months ended March 31, 2010, the Company and InvestorForce have $217.8 million available for these carryforwards. These losses expire in varying amounts between 2010 and 2023. Additionally, the Company and InvestorForce have $25.4 million of net operating loss carryforwards and $3.0 million of capital loss carryforwards that are not subject to the Section 382 annual limitation. The net operating losses expire between 2026 and 2029 and the capital losses expire in 2014.

GovDelivery has approximately $2.8 million of net operating loss carryforwards. The Company’s acquisition of GovDelivery in 2009 constituted a change in ownership under Internal Revenue Code Section 382. As a result, GovDelivery’s net operating losses are limited to approximately $1.0 million per year plus any recognized built-in gains. GovDelivery’s net deferred tax liability after acquisition accounting of $4.8 million reduced the Company’s valuation allowance.

A valuation allowance has been provided for the Company’s net deferred tax assets as the Company believes, after evaluating all positive and negative evidence, both historical and prospective, that it is more likely than not that these benefits will not be realized.

ICG Commerce files its own consolidated federal income tax return, separate from the Company. Due to ICG Commerce’s prior equity transactions, it experienced a change in ownership under Internal Revenue Code Section 382 in 2003. As a result, its net operating loss carryforwards are subject to an annual limitation. Based on an Internal Revenue Code Section 382 study completed in early 2010, and excluding ICG Commerce’s results for the three months ended March 31, 2010, approximately $74.0 million of net operating loss carryforwards are expected to be available to ICG Commerce between December 31, 2009 and December 31, 2023. The annual limitation ICG Commerce has on the utilization of its net operating losses is $3.1 million per year. The amount available in 2010 is $34.1 million.

ICG Commerce maintains a valuation allowance for its state net operating losses and its capital loss carryovers. The valuation allowance on the state net operating loss deferred tax assets is necessary due to the expectation that most will expire unused due to the timing and the amount of taxable income apportioned to these states on a separate company basis. A valuation allowance for the deferred tax asset associated with the capital loss carryovers is appropriate because ICG Commerce does not expect to generate any capital gains before the losses expire.

ICG Commerce recorded tax expense of $0.6 million for the three months ended March 31, 2010, representing an effective tax rate of 38.3%. This rate differs from the federal rate of 35% due to foreign and state taxes.

27

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

12. Net Income (Loss) per Share

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

	Three Months Ended
	March 31,
	2010		2009
	(in thousands, except
	shares and per share data)
Basic and Diluted:
Net income (loss) attributable to Internet Capital Group, Inc.	$	28,771	$	(11,005	)
Basic:
Net income (loss) attributable to Internet Capital Group, Inc. per share	$	0.79	$	(0.30	)
Diluted:
Net income (loss) attributable to Internet Capital Group, Inc. per share	$	0.79	$	(0.30	)
Shares used in computation of basic income (loss) per share		36,305,224		36,676,466
Stock options		36,079		—
Restricted stock		3,704		—
DSUs		—		—
SARs		522		—
Shares used in computation of diluted income (loss) per share		36,345,529		33,676,466

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

			Weighted Average
	Shares		Price Per Share
	��
Three Months Ended March 31, 2010
SARs		5,339,310	$	7.41
Stock options		404,782	$	36.15
Restricted stock		33,025	$	—
DSUs		36,000	$	—
Three Months Ended March 31, 2009
SARs		3,870,370	$	7.65
Stock options		604,204	$	36.58
Restricted stock		17,300	$	—
DSUs		36,000	$	—

28

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

13. 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 table summarizes the components of comprehensive loss:

	Three Months Ended
	March 31,
	2010			2009
	(in thousands)
Net Income (loss)	$	29,145		$	(10,613	)
Other comprehensive income (loss):
Unrealized holding gains (losses) in marketable securities		(2,701	)		12,224
Reclassification adjustments/realized net gains on marketable securities		(35,017	)		(174	)
Other accumulated other comprehensive income (loss)		38			15
Comprehensive income (loss)	$	(8,535	)	$	1,452
Less: Comprehensive income attributable to the noncontrolling interest		338			377
Comprehensive income (loss) attributable to Internet Capital Group, Inc.	$	(8,873	)	$	1,075

14. Share Repurchase Program

In accordance with the Company’s share repurchase program, the Company may repurchase, from time to time, up to $25.0 million of shares of Common Stock in the open market, in privately negotiated transactions or pursuant to trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act. Since commencement of this program, the Company has repurchased a total of 2,440,400 shares of Common Stock at an average purchase price of $4.89 per share. The Company has not made any repurchases of Common Stock during the three months ended March 31, 2010. The Company repurchased a total of 92,242 shares of Common Stock at an average purchase price of $3.97 per share during the three months ended March 31, 2009. All repurchases are reflected in “Treasury stock, at cost” as a reduction of Stockholders’ Equity on the Company’s Consolidated Balance Sheets in the relevant period.

29

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 the Consolidated Financial Statements and 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,” “us,” “our,” “ICG,” the “Company” or “Internet Capital Group”), and have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”).

Executive Summary

We focus on acquiring and building SaaS, technology-enabled BPO and Internet marketing companies that improve the productivity and efficiency of their business customers. We call these companies our “partner companies.” As of March 31, 2010 and the date of this Report, we hold ownership interests in 13 companies that we consider our partner companies. Additionally, from time to time we hold marketable securities in other companies, which, including amounts held in escrow, as of March 31, 2010 and the date of this Report, consist of Blackboard common stock and ICE common stock. The results of operations of our partner companies are reported within two segments: the “core” reporting segment and the “venture” reporting segment. The core reporting segment includes those consolidated and equity method partner companies in which ICG owns a principal controlling equity voting interest (53% on average as of March 31, 2010) and in which ICG’s management takes a very active role in providing strategic direction and management assistance. We expect to devote relatively large initial amounts of capital to acquire our core partner companies. The venture reporting segment includes partner companies in which we generally devote less capital than we do to our core companies and, therefore, in which we hold relatively smaller ownership stakes than we do in our core companies (24% on average as of March 31, 2010) and have less influence over their strategic direction and management decisions than we do over those of our core companies.

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 and 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 other stockholders do not possess the right to affect the significant operational management decisions of that partner company, the partner company’s accounts are reflected within our Consolidated Financial Statements. Generally, if we own between 20% and 50% of the outstanding voting securities of a partner company, that partner company’s accounts are not reflected within our Consolidated Financial Statements, but 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.

30

Because we own significant interests in SaaS, technology-enabled BPO and Internet marketing 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. These transactions and events are described in more detail in our Notes to Consolidated Financial Statements included hereto and include dispositions of, changes to and impairment of our partner company ownership interests and dispositions of our holdings of marketable securities.

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, 2010 and December 31, 2009:

	March 31, 2010						December 31, 2009
			Consolidated						Consolidated
	Corporate		Subsidiaries		Total		Corporate		Subsidiaries		Total
	(in thousands)
Cash and cash equivalents	$	64,755	$	19,961	$	84,716	$	29,443	$	26,038	$	55,481
Restricted cash		—		71		71		—		47		47
	$	64,755	$	20,032	$	84,787	$	29,443	$	26,085	$	55,528
Marketable securities(1)	$	34,811	$	—	$	34,811	$	72,965	$	—	$	72,965

⁽¹⁾ Includes a contributing asset of $0.2 million and an offsetting liability of $0.5 million at March 31, 2010 and December 31, 2009, respectively, related to derivative instruments associated with the Company’s marketable securities.

Subsequent to the quarter ended March 31, 2010, we acquired an additional equity voting interest in ICG Commerce from an existing stockholder of ICG Commerce for aggregate cash consideration of approximately $35.3 million. If this acquisition had occurred immediately prior to the end of the quarter ended March 31, 2010, our and our consolidated subsidiaries’ total cash and cash equivalents at March 31, 2010 would have been $49.5 million.

We intend to offer to purchase the remaining approximately 5% of ICG Commerce’s voting shares from the holders thereof (other than ICG Commerce employees and the other holders of ICG Commerce’s Series F Preferred Stock), including certain holders who are our direct or indirect affiliates, at prices based on the same valuation of ICG Commerce’s equity interests used to determine the purchase price in the acquisition described above. If we acquire all such shares at such valuation, the aggregate purchase price for such shares would be approximately $15.0 million.

We believe existing cash and cash equivalents 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 operating requirements. As of the date of this filing, we were not obligated for any material 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 during 2010; however, such acquisitions will generally be made at our discretion.

GovDelivery, ICG Commerce and InvestorForce have funded their operations through a combination of cash flow from operations, borrowings and equity issuances. GovDelivery and ICG Commerce expect that existing cash balances and cash flow from operations will be sufficient to fund their respective operations through 2010, while InvestorForce is likely to require additional borrowings and/or equity issuances to fund its operations through 2010.

Our consolidated working capital increased $37.2 million from December 31, 2009 to March 31, 2010, primarily due to an increase in cash related to sales of Blackboard common stock.

31

Summary of Statements of Cash Flows

	Three Months Ended
	March 31,
	2010			2009
	(in thousands)
Cash provided by (used in) operating activities	$	(10,355	)	$	(7,239	)
Cash provided by (used in) investing activities	$	39,968		$	(5,164	)
Cash provided by (used in) financing activities	$	(263	)	$	(480	)

Cash used in operating activities during the three months ended March 31, 2010 increased $3.1 million, from $7.2 million during the three months ended March 31, 2009 to $10.3 million during the three months ended March 31, 2010. The increase is primarily related to an increase in net income driven by the sale of Blackboard common stock included in “Other (income) loss” in our Consolidated Statements of Cash Flows for the three months ended March 31, 2010 and net changes in working capital components of $2.3 million from the three months ended March 31, 2009 to the three months ended March 31, 2010.

The change from cash used in investing activities of $5.2 million for the three months ended March 31, 2009 to cash provided by investing activities of $40.0 million during the three months ended March 31, 2010, was related primarily to fewer cash proceeds received from sales of marketable securities during the three months ended March 31, 2009 as compared to the three months ended March 31, 2010.

The decrease in cash used in financing activities from $0.5 million for the three months ended March 31, 2009 to $0.3 million for the three months ended March 31, 2010 is the result of stock repurchases of $0.4 million during 2009. We did not repurchase any common stock during the three months ended March 31, 2010. This change was offset by an increase in repayments of capital lease obligations during the three months ended March 31, 2010 as compared to the 2009 period.

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 to materially affect our financial position or cash flows.

Contractual Cash Obligations and Commercial Commitments

We had no material changes to contractual cash obligations and commercial commitments for the three months ended March 31, 2010.

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, 2010, we owned interests in 13 partner companies that are categorized below based on segment and method of accounting.

CORE PARTNER COMPANIES (% Voting Interest)
Consolidated	Equity	Cost
GovDelivery (89%)	Channel Intelligence (50%)(1)	(none)
ICG Commerce (64%)	Freeborders (31%)
InvestorForce (80%)	Metastorm (33%)
	StarCite (36%)
	WhiteFence (36%)

32

VENTURE COMPANIES (% Voting Interest)
Consolidated	Equity	Cost
(none)	Acquirgy (25%)	Anthem (9%)
	ClickEquations (33%)
	GoIndustry (26%)(2)
	SeaPass (26%)

(1)	Our ownership percentage is rounded up to 50%. We do not consolidate Channel Intelligence since we do not own a majority interest in the partner company, and additional factors support that we do not exert control over Channel Intelligence. See Note 3, “Ownership Interests in Partner Companies, Goodwill and Intangibles, net,” to our Consolidated Financial Statements.
(2)	As of March 31, 2010 and May 3, 2010, we owned 254,674,377 shares, or approximately 26% 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 3 – “Ownership Interests in Partner Companies and Goodwill” to our Consolidated Financial Statements.

Subsequent to the quarter ended March 31, 2010, we acquired an additional 12% equity voting interest in ICG Commerce from an existing stockholder of ICG Commerce (the “Selling Stockholder”) for aggregate cash consideration of approximately $35.3 million. As a result of this acquisition, which was consummated on May 5, 2010, we increased our voting ownership interest in ICG Commerce from 64% to 76%.

Certain of our officers and directors own limited partnership interests in the Selling Stockholder, a private equity fund. Collectively, these interests represent less than 2% of the outstanding partnership interests of the Selling Stockholder.

We intend to offer to purchase the remaining approximately 5% of ICG Commerce’s voting shares from the holders thereof (other than ICG Commerce employees and the other holders of ICG Commerce’s Series F Preferred Stock), including certain holders who are our direct or indirect affiliates, at prices based on the same valuation of ICG Commerce’s equity interests used to determine the purchase price in our acquisition of the Selling Stockholder’s shares of ICG Commerce.

Results of Operations

The following table 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 consistent between periods with the exception of partner company acquisitions and dispositions that occurred during 2009. Core segment results for the three months ended March 31, 2010 include GovDelivery, which was acquired on December 31, 2009. Additionally, the venture segment for the three months ended March 31, 2010 includes results from Acquirgy and SeaPass, which were acquired during the second half of 2009. The core segment for the three months ended March 31, 2009 includes Vcommerce, which was a consolidated subsidiary from May 2008 through August 2009. The method of accounting for any particular partner company may change based on our ownership interest.

“Corporate” expenses represent the general and administrative expenses of our business operations, which include supporting the partner companies and operating as a public company. The “Total Segment” net loss does not include items such as gains on the disposition of partner company ownership interests and marketable securities holdings and impairment charges associated with partner companies, which are reflected in “Other” reconciling items in the information that follows.

Segment Information (in thousands)
							Total			Reconciling Items						Consolidated
	Core			Venture			Segment			Corporate			Other			Results
For the Three Months Ended March 31, 2010
Revenues	$	26,294		$	—		$	26,294		$	—		$	—		$	26,294
Net income (loss) attributable to Internet Capital Group, Inc.	$	(2,929	)	$	(1,179	)	$	(4,108	)	$	(4,472	)	$	37,351		$	28,771
For the Three Months Ended March 31, 2009
Revenues	$	21,652		$	—		$	21,652		$	—		$	—		$	21,652
Net income (loss) attributable to Internet Capital Group, Inc.	$	(2,573	)	$	(1,125	)	$	(3,698	)	$	(4,476	)	$	(2,831	)	$	(11,005	)

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For the Three Months Ended March 31, 2010 and 2009

Results of Operations — Core Partner Companies

The following presentation 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,
	2010			2009
	(in thousands)
Selected data:
Revenues	$	26,294		$	21,652
Cost of revenue		(16,932	)		(13,205	)
Selling, general and administrative		(6,195	)		(4,616	)
Research and development		(2,424	)		(2,648	)
Amortization of intangible assets		(364	)		(77	)
Impairment related and other		(72	)		(30	)
Operating expenses		(25,987	)		(20,576	)
Interest and other		(378	)		(418	)
Income tax (expense) benefit		(616	)		53
Equity loss		(2,242	)		(3,284	)
Net loss	$	(2,929	)	$	(2,573	)

Revenue

Revenue increased $4.6 million from $21.7 million in the three months ended March 31, 2009 to $26.3 million in the three months ended March 31, 2010. This revenue increase was primarily driven by a 22% increase in revenues at ICG Commerce for the first quarter of 2010 from the comparable period in 2009 from new and existing customers, as well as a 49% increase in revenues at InvestorForce for the three months ended March 31, 2010 compared to the 2009 period. Revenues related to GovDelivery in the three months ended March 31, 2010 were consistent with revenues reported by Vcommerce for the three months ended March 31, 2009.

Operating Expenses

Operating expenses increased $5.4 million, from $20.6 million in the three months ended March 31, 2009, to $26.0 million in the three months ended March 31, 2010. This primarily relates to an increase in cost of revenues and selling, general and administrative expenses. These costs at ICG Commerce increased 30% from the 2009 period primarily due to an increase in headcount needed to service new customers and an increase in professional service fees in the three months ended March 31, 2010.

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Equity Loss

A portion of our net results from our core partner 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,
	2010			2009
	(in thousands)
Selected data:
Total revenues	$	44,745		$	46,181
Total net loss	$	(4,636	)	$	(7,917	)
Our share of total net loss	$	(1,702	)	$	(2,831	)
Amortization of intangible assets		(540	)		(453	)
Equity loss	$	(2,242	)	$	(3,284	)

Revenue from our core partner companies accounted for under the equity method of accounting decreased from $46.2 million during the three months ended March 31, 2009 to $44.7 million during the three months ended March 31, 2010, a decrease of $1.5 million, primarily due to decreases in revenue at Freeborders, StarCite and WhiteFence. These decreases were driven by the difficult macroeconomic conditions our core partner companies experienced during 2009 that continue into 2010. Despite the decrease in revenue, aggregate net results at our equity method core companies improved from the three months ended March 31, 2009 to the comparable period in 2010 due to improved cost management, resulting in a decrease in our share of this aggregate net loss.

Results of Operations — Venture Partner Companies

The following presentation includes our share of the results of our equity method venture partner companies. There are currently no consolidated partner companies that we consider to be part of our venture reporting segment. Accordingly, our share of the results of our venture partner companies is recorded in our Consolidated Statements of Operations under “Equity loss.”

	Three Months Ended March 31,
	2010			2009
	(in thousands)
Selected data:
Our share of total net loss	$	(1,012	)	$	(1,125	)
Amortization of intangible assets		(167	)		—
Equity loss	$	(1,179	)	$	(1,125	)

Equity income (loss) for the three months ended March 31, 2010 relates to our share of Acquirgy’s, ClickEquations’, GoIndustry’s and SeaPass’ results. Equity income (loss) for the three months ended March 31, 2009 relates to our share of GoIndustry’s and ClickEquations’ results.

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Results of Operations — Reconciling Items

Corporate

	Three Months Ended March 31,
	2010			2009
	(in thousands)
Selected data:
General and administrative	$	(4,524	)	$	(4,600	)
Interest income (expense), net		52			124
Net loss	$	(4,472	)	$	(4,476	)

General and Administrative

Our general and administrative expenses decreased $0.1 million for the three months ended March 31, 2010 from the comparable 2009 period, primarily related to a decrease in equity-based compensation, offset by an increase in employee-related expenses partially due to an increase in headcount.

Interest Income/Expense

The interest income (expense), net, decreased $0.1 million for the three months ended March 31, 2010 from the comparable 2009 period. This decrease is attributable to lower cash balances in the three months ended March 31, 2010 compared with the three months ended March 31, 2009.

Other

	Three Months Ended March 31,
	2010			2009
	(in thousands)
Corporate other income (loss)	$	40,639		$	(1,895	)
Impairment of GoIndustry (Venture)		(2,914	)		(544	)
Noncontrolling interest		(374	)		(392	)
Net income (loss)	$	37,351		$	(2,831	)

Corporate Other Income (Loss), Net

Corporate other income in the three months ended March 31, 2010 of $40.6 million was the result of a $35.0 million gain on the sale of marketable securities, a $5.2 million gain related to distributions of ownership interests in partner companies and a gain of $0.7 million in the value of our Blackboard hedges during the quarter, offset by a loss of $0.2 million related to the termination of two Blackboard hedges during the period and a dilution loss of $0.1 million related to the issuance of common stock by GoIndustry as holdback consideration for a prior acquisition. Corporate other loss of $(1.9) million during the three months ended March 31, 2009 was primarily driven by the loss in the value of our Blackboard hedges during the period, offset by $1.4 million of gains related to distributions of ownership interests in partner companies and a $0.2 million gain on the sale of marketable securities.

Impairments

We recorded $2.9 million and $0.5 million of impairment charges related to our basis in GoIndustry during the three months ended March 31, 2010 and 2009, respectively, related to decreases in the fair market value of our equity holdings in GoIndustry.

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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 test goodwill for impairment annually, or more frequently as conditions warrant, and intangible assets when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Additionally, we perform ongoing business reviews to evaluate our ownership interests in partner companies accounted for under the equity and cost methods of accounting to determine whether an other than temporary decline in the value of a partner company should be recognized. We 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 using 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 the 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 departments 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 and any additional fees as earned, which is typically over the life of the customer contract, which approximates the life of the customer relationship.

GovDelivery revenues generally consist of nonrefundable set-up fees and monthly maintenance and hosting fees. These fees are deferred and recognized as the services are performed, which is typically over the service term. Costs related to performing set-up services are expensed as incurred. Revenue from labor law posters are recognized upon delivery provided a purchase order has been received, the price to the buyer is fixed or determinable and collectibility is reasonably assured. Revenues from update and subscription services for labor law posters are deferred and recognized ratably over the service term.

Vcommerce was a consolidated company from May 2008, when our ownership stake increased to 53%, through August 2009, at which time it sold substantially all of its assets and liabilities. Vcommerce generated revenue from service fees earned by it in connection with the development and operations of its clients’ e-commerce businesses. Service fee revenue primarily consisted of transaction fees, implementation fees and professional services fees, as well as access and maintenance fees. Vcommerce recognized revenue from services provided in accordance with general revenue recognition criteria either over the term of the customer contract or as services were rendered, depending on the type of revenue.

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Equity Income/Loss

We record our share of our partner companies’ net income/loss, which is accounted for under the equity method of accounting as equity income/loss. Since we do not control these companies, this equity income/loss is based on unaudited results of operations of our partner companies and may require adjustment in the future when the audits of our partner companies are complete. The compilation and review of these results of operations require significant judgment and estimates by management.

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, 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.

Fair Value Measurements

Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. There are three levels of inputs that may be used to measure fair value. 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.

Recent Accounting Pronouncements

In October 2009, the FASB issued accounting guidance related to revenue recognition for transactions with multiple deliverables, which impacts the determination of when the individual deliverables included in a multiple-element arrangement may be treated as separate units of accounting. This guidance becomes effective for us on January 1, 2011. We are currently evaluating the effect this guidance will have on our consolidated financial statements.

In October 2009, the FASB issued accounting guidance related to certain revenue arrangements that include software elements, which amends the scope of pre-existing software revenue guidance. This guidance becomes effective for us on January 1, 2011. We are currently evaluating the effect this guidance will have on our consolidated financial statements.

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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, 2010 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, 2010, would result in a decrease of approximately $7.1 million in the fair value of our public holdings. As of March 31, 2010 and May 3, 2010, the Company was party to cashless collar contracts with various expiration dates in 2010 to hedge 375,000 shares of its total holdings of 831,866 shares and 703,094 shares, respectively, of Blackboard common stock at weighted average minimum and maximum prices per share of $28.49 and $63.99, 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.

ICG Commerce conducts a portion of its business in foreign currencies, primarily those of European countries and may utilize derivative financial instruments, specifically fair value hedges, to manage foreign currency risks. In accordance with GAAP, gains and losses related to fair value hedges are recognized in income along with adjustments of carrying amounts of the hedged items. Therefore, its put option is marked to market, and unrealized gains and losses are included in current period net income. These options provide a predetermined rate of exchange at the time the option is purchased and allows ICG Commerce to minimize the risk of currency fluctuations. In determining the use of its put option, ICG Commerce considers the amount of sales and purchases made in local currencies, the type of currency and the costs associated with the contracts. During the three months ended March 31, 2010, ICG Commerce purchased a put option to mitigate the risk of currency fluctuations at ICG Commerce’s operations in the United Kingdom. This option is net settled quarterly, resulting in an immaterial loss for the current quarter.

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.

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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-15(e) and 15d-15(e) 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 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 have been designed and are effective to provide reasonable assurance that information required to be disclosed 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 and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding require disclosure.

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.

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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. While the Court of Appeals decision did not automatically apply to the case against the Company, the defendants moved for, and the Court granted, an order that would apply the decision to all cases, including the consolidated action against the Company. On August 14, 2007, the plaintiffs filed an amended “master” complaint containing allegations purportedly common to 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 moved to dismiss the amended complaints. Rulings on both the motion to certify the Focus Cases as class actions and to dismiss those cases remain outstanding. The District 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.

On April 2, 2009, the plaintiffs filed a motion for preliminary approval of a proposed global settlement of all claims asserted in the coordinated class action securities litigation on behalf of the class plaintiffs in the respective actions against the various issuer and underwriter defendants, including all claims asserted against the Company. The motion further seeks certification of settlement classes as to each action against the defendants, including the Company. The Company has assented to the proposed settlement, which does not require any monetary contribution from the Company and would be funded by various underwriter defendants and the defendants’ insurers. On June 10, 2009, the District Court granted preliminary approval of the proposed settlement and of the form of notice of the proposed settlement to be provided to members of the proposed settlement class. The District Court scheduled a hearing for September 10, 2009 to determine whether to approve the proposed settlement.

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The final hearing was held on September 10, 2009. On October 5, 2009, the District Court granted final approval of the proposed global settlement, subject to the rights of the parties to appeal the settlement within 30 days of such approval. Pursuant to the terms of the approved settlement, the Company is not required to make any monetary contribution to fund the required settlement payments, which are being funded by various underwriter defendants and the defendants’ insurers.

On or about October 23, 2009, three members of the settlement class who had been shareholders of an issuer other than the Company filed a petition seeking leave to appeal the District Court’s final approval to the Second Circuit Court of Appeals on an interlocutory basis. No judicial ruling or action has been taken on the motion. On or before November 6, 2009, three notices of appeal were filed with respect to the District Court’s order granting final approval of the global settlement. On December 14, 2009, the District Court entered a final judgment approving and giving effect to the global settlement as it related to the consolidated actions against the Company. The final judgment created a settlement class of plaintiffs comprised of persons who purchased or otherwise acquired the common stock and call options of the Company during the period of August 4, 1999 through December 6, 2000, provided for the distribution of settlement proceeds to the members of the class and approval of attorneys’ fees to class counsel consistent with the terms of the global settlement, barred prosecution of all settled claims by members of the class and their representatives, released the defendants and other protected persons from such claims and dismissed all claims against the Company and other defendants in the consolidated amended action with prejudice. No notices of appeal have been filed with respect to the December 14, 2009 final judgment.

The appeals referenced in the November 6, 2009 notices of appeal have been docketed in the Court of Appeals for the Second Circuit, but no briefing schedule has been set and at least one of the appealing class members has stated that no briefing is possible at the present time. By order dated April 7, 2010, the District Court directed that the appealing class members identify the specific class, by company, to which they purport to belong. The District Court’s order further directed the clerk of the court to enter the appealing class members’ notices of appeal only in those cases as to which the appealing class members identify themselves as members of the class certified. No such notice of appeal has been entered in the action against the Company. Separately, on April 16, 2010, liaison counsel for the plaintiffs in the coordinated class action proceedings filed a motion in the District Court seeking an order requiring the appellant class members to post a bond as a condition of pursuing their appeals from the October 5, 2009 order approving the global settlement. Briefing on the motion to impose a bond is not concluded.

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, 2009, 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 and/or operating results. There have been no material changes with respect to the Company’s risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2009.

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

Issuer Purchases of Equity Securities

In 2008, the Company announced the approval by its Board of Directors of a share repurchase program under which the Company could repurchase, from time to time, up to $25.0 million of shares of its Common Stock in the open market, in privately negotiated transactions or pursuant to trading plans meeting the requirements of Rule 10b5-1 under the Exchange Act. The table below contains information relating to the repurchases of Company Common Stock that occurred from commencement of this program through the date of the filing of this Report.

					Total Number		Approximate
					of Shares		Dollar Value
					Purchased as		That May Yet
	Total Number		Average		Part of Publicly		Be Purchased
	of Shares		Price Paid		Announced		Under the
Monthly Period	Purchased(1)		per Share(2)		Program(1)		Program
Repurchased as of 12/31/09		2,440,400	$	4.89		2,440,400	$13.1 million
1/1/10 to 1/31/10		0		—		0	$13.1 million
2/1/10 to 2/28/10		0		—		0	$13.1 million
3/1/10 to 3/31/10		0		—		0	$13.1 million
4/1/10 to 4/30/10		0		—		0	$13.1 million
5/1/10 to 5/7/10		0		—		0	$13.1 million
Total		2,440,400	$	4.89		2,440,400	$13.1 million

(1)	All shares purchased in open market transactions.
(2)	Average price paid per share excludes commissions.

ITEM 3. Defaults Upon Senior Securities

None.

ITEM 4. (Removed and Reserved)

ITEM 5. Other Information

None.

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ITEM 6. Exhibits

Exhibit Index

Exhibit Number		Document
	11.1	Statement Regarding Computation of Per Share Earnings (included herein at Note 12 “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 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 7, 2010	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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