Actua (ACTA) 10-Q 2011 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the Quarterly Period Ended September 30, 2011.

or

¨ 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

ICG GROUP, INC.

(f/k/a Internet Capital Group, Inc.)

(Exact name of registrant as specified in its charter)

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

690 Lee Road, Suite 310, Wayne, PA	19087
(Address of principal executive offices)	(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.    Yes  x    No  ¨

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

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

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

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

The number of shares of ICG Group, Inc.’s Common Stock, $0.001 par value per share, outstanding as of November 3, 2011 was 37,448,243 shares.

ICG GROUP, INC.

QUARTERLY REPORT ON FORM 10-Q

INDEX

ITEM		PAGE NO.
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements:
	Consolidated Balance Sheets—September 30, 2011 (unaudited) and December 31, 2010		5
	Consolidated Statements of Operations (unaudited)—Three and Nine Months Ended September  30, 2011 and 2010		6
	Consolidated Statements of Changes in Equity (unaudited)—Nine Months Ended September  30, 2011 and 2010		7
	Consolidated Statements of Cash Flows (unaudited)—Nine Months Ended September  30, 2011 and 2010		8
	Notes to Consolidated Financial Statements		9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		43
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings		44
Item 1A.	Risk Factors		45
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		46
Item 3.	Defaults Upon Senior Securities		46
Item 4.	(Removed and Reserved)		46
Item 5.	Other Information		46
Item 6.	Exhibits		47
Signatures			48

Our Internet website address is www.icg.com. Unless this Quarterly Report on Form 10-Q (this “Report”) explicitly states otherwise, neither the information on our website, nor the information on the websites of any of the companies in which we hold equity or convertible debt ownership interests (these companies are hereinafter referred to as “our companies” or “ICG’s 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 100 F Street, N.E., 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.

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 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 companies’ customers;

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

• our companies’ collective ability to retain existing customer relationships and secure new ones;

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

• our and our companies’ collective ability to retain key personnel;

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

• our ability to successfully integrate any acquired businesses, and any other difficulties related to the acquisition of businesses;

• the impact of any potential acquisitions, dispositions or other strategic transactions, which may impact our operations, financial condition, capitalization or indebtedness;

• our ability to maximize value in connection with divestitures; 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 and Form 10-K/A for the year ended December 31, 2010, as well as other reports and registration statements filed by us with the SEC.

2

PART I – FINANCIAL INFORMATION

Our Companies

The results of operations of our companies are reported within two segments: the “core” reporting segment and the “venture” reporting segment. Our core reporting segment includes the companies in which our management takes a very active role in providing strategic direction and management assistance. We own majority controlling equity positions in (and therefore consolidate the financial results of) three of these core companies, which we call our “consolidated core companies.” We generally own substantial minority equity positions (i.e., the largest equity positions) in our other core companies, which we call our “equity core companies.” We expect to devote relatively large initial amounts of capital to acquire stakes in core companies, particularly consolidated core companies, since any such acquisition would entail the deployment of cash and/or the issuance of ICG Group, Inc. stock to purchase a large equity stake in a target with relatively strong financial characteristics and growth potential.

Our venture reporting segment includes companies (our “venture 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. As a result, we generally have less influence over the strategic direction and management decisions of our venture companies than we do over those of our core companies.

At September 30, 2011, our consolidated core 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 feeds 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 September 30, 2011, our equity core 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.

3

Freeborders, Inc. (“Freeborders”)

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

StarCite, Inc. (“StarCite”)

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

WhiteFence, Inc. (“WhiteFence”)

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

At September 30, 2011, our venture companies consisted of:

Acquirgy, Inc. (“Acquirgy”)

Acquirgy specializes in direct response marketing services and technology that provide customers a wide range of tools to help market their products and services on the Internet and through traditional media channels such as television, radio, and print advertising.

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. The company’s technology allows access to information in real time, which increases efficiency across all lines of the insurance business.

4

Item 1. Financial Statements

ICG GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2011			December 31, 2010
	(Unaudited)
	(in thousands, except per share data)
Assets
Current Assets
Cash and cash equivalents	$	117,817		$	92,438
Restricted cash		140			201
Accounts receivable, net of allowance ($709-2011; $716-2010)		31,233			25,832
Deferred tax assets		804			4,830
Income tax receivable		—			6,314
Prepaid expenses and other current assets		3,534			2,528
Total current assets		153,528			132,143
Fixed assets, net of accumulated depreciation and amortization ($16,415-2011; $14,009-2010)		6,154			5,991
Ownership interests		49,635			83,829
Goodwill		22,279			20,317
Intangibles, net		12,819			13,832
Deferred tax assets		26,432			22,973
Cost method investments		9,680			1,317
Other assets, net		879			587
Total Assets	$	281,406		$	280,989
Liabilities
Current Liabilities
Current maturities of long-term debt	$	4,230		$	4,623
Accounts payable		2,049			1,973
Accrued expenses		2,652			2,777
Accrued compensation and benefits		11,242			15,327
Deferred revenue		14,151			10,293
Total current liabilities		34,324			34,993
Long-term debt		11,685			15,458
Other liabilities		1,740			927
Total Liabilities		47,749			51,378
Redeemable noncontrolling interest (Note 14)		1,326			1,182
Equity
ICG 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, 39,628 shares (2011) and 39,439 shares (2010) issued		40			39
Treasury Stock, at cost, 3,281 shares (2011) and 2,440 shares (2010)		(20,619	)		(12,031	)
Additional paid-in capital		3,542,309			3,541,044
Accumulated deficit		(3,295,599	)		(3,305,299	)
Accumulated other comprehensive income		63			54
Total ICG Group, Inc.’s Stockholders’ Equity		226,194			223,807
Noncontrolling Interest		6,137			4,622
Total Equity		232,331			228,429
Total Liabilities, Redeemable noncontrolling interest and Equity	$	281,406		$	280,989

See accompanying Notes to Consolidated Financial Statements

5

ICG GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(in thousands, except per share data)
Revenues	$	35,142		$	30,222		$	104,424		$	82,634
Operating expenses
Cost of revenue		21,128			18,056			63,893			52,381
Selling, general and administrative		10,387			9,989			34,089			31,211
Research and development		3,091			2,729			9,545			7,798
Amortization of intangible assets		338			342			1,013			1,020
Impairment related and other		484			1,004			603			1,172
Total operating expenses		35,428			32,120			109,143			93,582
Operating income (loss)		(286	)		(1,898	)		(4,719	)		(10,948	)
Other income (loss), net		(374	)		9,196			26,184			74,119
Interest income		90			56			298			255
Interest expense		(145	)		(123	)		(477	)		(192	)
Income (loss) from continuing operations before income taxes, equity loss and noncontrolling interest		(715	)		7,231			21,286			63,234
Income tax (expense) benefit		1,338			(2,860	)		(639	)		(3,065	)
Equity loss		(3,245	)		(2,952	)		(10,006	)		(13,867	)
Income (loss) from continuing operations		(2,622	)		1,419			10,641			46,302
Income (loss) from discontinued operations		—			601			—			802
Net income (loss)		(2,622	)		2,020			10,641			47,104
Less: Net income attributable to the noncontrolling interest		335			229			941			781
Net income (loss) attributable to ICG Group, Inc.	$	(2,957	)	$	1,791		$	9,700		$	46,323
Amounts attributable to ICG Group, Inc.:
Net income (loss) from continuing operations	$	(2,957	)	$	1,339		$	9,700		$	45,711
Net income (loss) from discontinued operations		—			452			—			612
Net income (loss)	$	(2,957	)	$	1,791		$	9,700		$	46,323
Basic income (loss) per share attributable to ICG Group, Inc.:
Income (loss) from continuing operations	$	(0.08	)	$	0.04		$	0.26		$	1.25
Income (loss) from discontinued operations		—			0.01			—			0.02
Net income (loss)	$	(0.08	)	$	0.05		$	0.26		$	1.27
Shares used in computation of basic income (loss) per share		36,556			36,368			36,819			36,340
Diluted income (loss) per share attributable to ICG Group, Inc.:
Income (loss) from continuing operations	$	(0.08	)	$	0.04		$	0.26		$	1.24
Income (loss) from discontinued operations		—			0.01			—			0.02
Net income (loss)	$	(0.08	)	$	0.05		$	0.26		$	1.26
Shares used in computation of diluted income (loss) per share		36,556			36,956			37,738			36,679

See accompanying Notes to Consolidated Financial Statements

6

ICG GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(UNAUDITED)

	ICG Group, Inc. Stockholders’ Equity
																	Accumulated
					Treasury Stock,						Additional						Other			Non-
	Common Stock				at cost						Paid-In			Accumulated			Comprehensive			Controlling
	Shares		Amount		Shares			Amount			Capital			Deficit			Income			Interest			Total
	(in thousands)
Balance as of December 31, 2009		38,796	$	39		(2,440	)	$	(12,031	)	$	3,573,347		$	(3,351,888	)	$	71,198		$	21,077		$	301,742
Equity-based compensation related to stock appreciation rights and stock options		—		—		—			—			1,540			—			—			—			1,540
Equity-based compensation related to deferred stock units		—		—		—			—			150			—			—			—			150
Equity-based compensation related to restricted stock		—		—		—			—			72			—			—			—			72
Issuance of deferred stock units to directors, net of forfeitures		53		—		—			—			163			—			—			—			163
Issuance of restricted stock, net of forfeitures		17		—		—			—			(6	)		—			—			—			(6	)
Exercise of stock appreciation rights, net of surrenders		151		—		—			—			(375	)		—			—			—			(375	)
Impact of redeemable noncontrolling interest accretion		—		—		—			—			(161	)		—			—			—			(161	)
Impact of incremental acquisition of ICG Commerce		—		—		—			—			(38,878	)		—			27			(10,796	)		(49,647	)
Impact of subsidiary equity transactions		—		—		—			—			3,987			—			—			(5,473	)		(1,486	)
Noncontrolling owners share of Accumulated Other Comprehensive Income of consolidated subsidiary		—		—		—			—			—			—			(19	)		19			—
Net unrealized depreciation in marketable securities and reclassification adjustments		—		—		—			—			—			—			(71,170	)		—			(71,170	)
Net income (loss)		—		—		—			—			—			46,323			—			693			47,016
Other activity		—		—		—			—			46			—			—			—			46
Balance as of September 30, 2010		39,017	$	39		(2,440	)	$	(12,031	)	$	3,539,885		$	(3,305,565	)	$	36		$	5,520		$	227,884
Balance as of December 31, 2010		39,439	$	39		(2,440	)	$	(12,031	)	$	3,541,044		$	(3,305,299	)	$	54		$	4,622		$	228,429
Equity-based compensation related to stock appreciation rights and stock options		—		—		—			—			1,645			—			—			—			1,645
Equity-based compensation related to deferred stock units		—		—		—			—			528			—			—			—			528
Equity-based compensation related to restricted stock		—		—		—			—			174			—			—			—			174
Issuance of deferred stock units to directors		68		—		—			—			116			—			—			—			116
Issuance of restricted stock		82		—		—			—			—			—			—			—			—
Exercise of stock appreciation rights and stock options, net of surrenders		39		1		—			—			5			—			—			—			6
Impact of redeemable noncontrolling interest accretion		—		—		—			—			(309	)		—			—			—			(309	)
Impact of incremental acquisition of ICG Commerce		—		—		—			—			(1,059	)		—			—			(261	)		(1,320	)
Impact of subsidiary equity transactions		—		—		—			—			165			—			—			688			853
Repurchase of common stock		—		—		(841	)		(8,588	)		—			—			—			—			(8,588	)
Noncontrolling owners share of Accumulated Other Comprehensive Income of consolidated subsidiary		—		—		—			—			—			—			9			(9	)		—
Net income (loss)		—		—		—			—			—			9,700			—			1,097			10,797
Balance as of September 30, 2011		39,628	$	40		(3,281	)	$	(20,619	)	$	3,542,309		$	(3,295,599	)	$	63		$	6,137		$	232,331
				��

See accompanying Notes to Consolidated Financial Statements.

7

ICG GROUP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Nine Months Ended September 30,
	2011			2010
	(in thousands)
Operating Activities – continuing operations
Net income (loss)	$	10,641		$	47,104
(Income) loss from discontinued operations		—			(802	)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Depreciation and amortization		3,451			2,835
Impairment related and other		603			1,172
Equity-based compensation		2,705			2,297
Equity loss		10,006			13,867
Other (income) loss		(26,184	)		(74,119	)
Deferred income taxes		567			3,924
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		(5,443	)		(8,067	)
Tax receivable		6,314			4,757
Prepaid expenses and other assets		(1,276	)		(890	)
Accounts payable		167			310
Accrued expenses		(1,227	)		(1,760	)
Accrued compensation and benefits		(4,050	)		143
Deferred revenue		3,833			4,092
Other liabilities		849			(301	)
Cash flows provided by (used in) operating activities		956			(5,438	)
Investing Activities – continuing operations
Capital expenditures, net		(2,596	)		(2,739	)
Advanced deposits for acquisition of fixed assets		(41	)		(37	)
Change in restricted cash		62			(104	)
Proceeds from sales of marketable securities		—			74,383
Proceeds from sales/distributions of ownership interests		51,914			1,836
Proceeds from other distributions		1,424			—
Proceeds from sale of discontinued operations		—			670
Acquisitions of ownership interests and cost method investments		(10,950	)		(2,252	)
Acquisitions by subsidiary		(1,193	)		—
Cash flows provided by (used in) investing activities		38,620			71,757
Financing Activities – continuing operations
Acquisition of noncontrolling interest in subsidiary equity		(1,320	)		(49,647	)
Long-term debt and capital lease obligations, net		(4,160	)		19,597
Purchase of treasury stock		(8,588	)		—
Tax withholdings related to equity-based awards		(146	)		(375	)
Cash received for stock option exercises		151			—
Exercises of stock options at subsidiary		—			400
Payment of dividend by ICG Commerce		—			(1,620	)
Other financing activities		(49	)		1
Cash flows provided by (used in) financing activities		(14,112	)		(31,644	)
Effect of exchange rates on cash		(85	)		(40	)
Discontinued Operations
Cash flows provided by (used in) operating activities		—			633
Cash flows provided by (used in) investing activities		—			(11	)
Cash flows provided by (used in) financing activities		—			—
Net increase (decrease) in cash and cash equivalents from discontinued operations		—			622
Net increase (decrease) in cash and cash equivalents		25,379			35,257
Cash and cash equivalents at beginning of period		92,438			55,481
Cash and cash equivalents at the end of period	$	117,817		$	90,738

See accompanying Notes to Consolidated Financial Statements

8

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

Description of the Company

ICG Group, Inc. (f/k/a Internet Capital Group, Inc.) (together with its subsidiaries, “ICG”) acquires and builds SaaS and technology-enabled business process outsourcing (BPO) companies that improve the productivity and efficiency of their business customers. Founded in 1996, ICG devotes its expertise and capital to maximizing the success of these companies.

2. Significant Accounting Policies

Basis of Presentation

The Consolidated Financial Statements contained herein (the “Consolidated Financial Statements”) include the accounts of ICG Group, Inc. and its wholly-owned subsidiaries, wholly-controlled subsidiaries and majority-owned subsidiaries. ICG’s Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010 include the financial position of GovDelivery, ICG Commerce and InvestorForce. ICG’s Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and 2010 include the results of GovDelivery, ICG Commerce and InvestorForce. The 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. The Consolidated Financial Statements should be read in connection with the consolidated financial statements and notes thereto included in ICG’s Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2010. Results of operations for the three- and nine-month periods ended September 30, 2011 are not necessarily indicative of the results of operations expected for the full year.

Principles of Accounting for Ownership Interests

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

Consolidation. Companies in which ICG 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 generally accounted for under the consolidation method of accounting. Under this method, a subsidiary’s balance sheet and results of operations are reflected within the Consolidated Financial Statements, and all significant intercompany accounts and transactions have been eliminated. Participation of other stockholders in the net assets and in the earnings or losses of a consolidated subsidiary is reflected in the line items “Noncontrolling Interest” in ICG’s Consolidated Balance Sheets and “Net income attributable to the noncontrolling interest” in ICG’s Consolidated Statements of Operations. Noncontrolling interest adjusts ICG’s consolidated results of operations to reflect only ICG’s share of the earnings or losses of the consolidated subsidiary. The results of operations and cash flows of a consolidated subsidiary are generally included through the latest interim period in which ICG owned a greater than 50% direct or indirect voting interest for the entire interim period or otherwise exercised control over the company.

Equity-based compensation activity at ICG’s consolidated subsidiaries may result in changes to ICG’s equity ownership of those companies. This activity typically results in adjustments to ICG’s carrying value of the relevant consolidated company and ICG’s additional paid-in capital. Any such activity is included in the line item “Impact of subsidiary equity transactions” in ICG’s Consolidated Statements of Changes in Equity.

Equity Method.Companies that are not consolidated, but over which ICG exercises significant influence, are accounted for under the equity method of accounting and are referred to in this Report as “equity method companies.” Whether or not ICG exercises significant influence with respect to a company depends on an evaluation of several factors, including, among others, representation on the company’s board of directors and equity ownership level, which is generally between a 20% and a 50% interest in the voting securities of an equity method company, as well as voting rights associated with ICG’s holdings in common stock, preferred stock and other convertible instruments in that company. Under the equity method of accounting, a company’s accounts are not reflected in ICG’s Consolidated Balance Sheets and Statements of Operations. ICG’s share of the earnings and/or losses of the company, as well as any adjustments resulting from prior period finalizations of equity income/losses, are reflected in the line item “Equity loss” in ICG’s Consolidated Statements of Operations. For the three and nine months ended September 30, 2011, those prior period finalizations are not material. The carrying values of ICG’s equity method companies are reflected in the line item “Ownership interests” in ICG’s Consolidated Balance Sheets.

9

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2. Significant Accounting Policies – (Continued)

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

Cost Method.Companies not accounted for under either the consolidation method or equity method of accounting are accounted for under the cost method of accounting and are referred to in this Report as “cost method companies.” ICG’s share of the earnings and/or losses of cost method companies is not included in ICG’s Consolidated Balance Sheets or Consolidated Statements of Operations. However, impairment charges related to cost method companies are recognized in ICG’s Consolidated Statements of Operations. If circumstances suggest that the value of a cost method company with respect to which an impairment charge has been made has subsequently recovered, that recovery is not recorded. The carrying values of ICG’s cost method companies are reflected in the line item “Cost method investments” in ICG’s Consolidated Balance Sheets.

ICG initially records its carrying value in companies accounted for under the cost method at cost, unless the equity securities of a cost method company have readily determinable fair values based on quoted market prices, in which case the 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.

Changes in Ownership Interests

Any changes in ICG’s ownership interest in a consolidated subsidiary in which ICG maintains control is recognized as an equity transaction, with appropriate adjustments to both ICG’s additional paid-in capital and the corresponding noncontrolling interests. If control is lost, any retained interest is measured at fair value, and a gain or loss is recognized in ICG’s Consolidated Statements of Operations at that time. In addition, to the extent ICG maintains a smaller equity ownership, the accounting method used for that company is adjusted to the equity or cost method of accounting, as appropriate, for subsequent periods.

An increase in ICG’s ownership interest in an equity method company over which ICG maintains significant influence is accounted for as a step acquisition, with an allocation of the excess purchase price to the fair value of the net assets acquired. A decrease in ICG’s ownership in an equity method company over which ICG maintains significant influence is accounted for as a dilution gain or loss in ICG’s Consolidated Statements of Operations representing the difference between ICG’s share of the underlying net assets of the company prior to the relevant change in ownership and ICG’s share of the underlying net assets of the company subsequent to the relevant change in ownership. When a change occurs that results in a loss of the ability to exercise significant influence over an equity method company, ICG discontinues equity method accounting and applies the cost method of accounting as of the date the ability to exercise significant influence was lost. A change resulting in an increase in ICG’s ownership interest in an equity method company to that of a controlling financial interest is accounted for as a step acquisition, with an allocation of the purchase price to the fair value of the net assets acquired. ICG remeasures its previously held ownership interest in a company that was previously not consolidated at the acquisition date fair value; any gain or loss resulting from this remeasurement is recognized in ICG’s Consolidated Statements of Operations at that time. In addition, ICG begins to include the financial position and operating results of the newly-consolidated subsidiary in its Consolidated Financial Statements from the date ICG obtains the controlling financial interest in that subsidiary.

Any change in ICG’s ownership interest in a cost method company resulting in ICG’s ability to exercise significant influence over that company or in ICG’s obtaining a controlling financial interest in that company is accounted for with a retroactive adjustment of ICG’s ownership interest for ICG’s share of the past results of the former cost method company’s operations. Therefore, prior results of operations of the former cost method company could change the value of ICG’s ownership interest on its Consolidated Balance Sheets at the time of any such retroactive adjustment; any such change could be significant. Such an increase also results in an allocation of the purchase price to the fair value of the net assets acquired. Consistent with the accounting for an equity method company, should ICG’s ownership interest in a cost method company increase to that of a controlling financial interest, ICG remeasures its previously held ownership interest at the acquisition date fair value and recognizes any gain or loss resulting from this remeasurement in its Consolidated Statements of Operations at that time. In addition, ICG begins to include the financial position and operating results of the newly-consolidated subsidiary in its Consolidated Financial Statements from the date ICG obtains the controlling financial interest in that subsidiary.

10

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2. Significant Accounting Policies – (Continued)

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could materially differ from those estimates. These estimates include evaluation of ICG’s convertible debt and equity holdings in 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, such as the current economic environment, that management believes to be reasonable under the circumstances. Management adjusts those estimates and assumptions when facts and circumstances dictate that it is necessary or appropriate to do so. Volatile equity markets and reductions in information technology spending have combined to increase the uncertainty inherent in those estimates and assumptions. It is reasonably possible that ICG’s accounting estimates with respect to the ultimate recoverability of ICG’s ownership interests in convertible debt and equity holdings, goodwill and the useful life of intangible assets could change in the near term and that the effect of such changes on ICG’s consolidated financial statements could be material. Management believes the recorded amounts of ownership interests, goodwill, intangible assets and other assets are not impaired at September 30, 2011.

Ownership Interests, Goodwill, Intangibles, net and Cost Method Investments

ICG evaluates its carrying value in equity method companies and cost method companies continuously to determine whether an other than temporary decline in the fair value of any such company exists and should be recognized. In order to make this determination, ICG considers each such company’s achievement of its business plan objectives and milestones, the fair value of its ownership interest in each such company (which, in the case of any company listed on a public stock exchange, is the quoted stock price of the relevant ownership interest), the financial condition and prospects of each such company, and other relevant factors. The business plan objectives and milestones ICG 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 ICG’s carrying value of a company with its estimated fair 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. ICG concluded that the carrying value of its equity and cost method companies was not impaired as of September 30, 2011 or December 31, 2010. However, during the nine months ended September 30, 2010, ICG recorded an impairment charge in the amount of $2.9 million related to a decline in the fair value of its equity holdings in GoIndustry that ICG believed was other than temporary. See Note 5, “Ownership Interests.”

ICG tests goodwill for impairment annually during the fourth quarter of each year, 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. ICG concluded that its goodwill and net intangible assets were not impaired as of September 30, 2011 or December 31, 2010. See Note 3, “Goodwill and Intangibles, net.”

Revenue Recognition

During the three and nine months ended September 30, 2011 and 2010, ICG’s consolidated revenues were attributable to ICG Commerce, GovDelivery and InvestorForce.

ICG Commerce generates revenue from strategic sourcing and procurement outsourcing services. Procurement outsourcing services generally include 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 (excluding transaction fees and gain-share fees) under the contractual arrangements it has with its customers and generally recognizes revenue under those arrangements on a straight-line basis over the term of the relevant contract, which approximates the life of the customer relationship. Additionally, performance-based 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.

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ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

2. Significant Accounting Policies – (Continued)

GovDelivery revenues generally consist of nonrefundable setup 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 setup services are expensed as incurred.

InvestorForce generates revenue from license fees earned in connection with hosted services, setup fees and support and maintenance fees, as well as from professional services. Hosted services primarily consist of data aggregation, performance calculation, real-time analysis and automated production of performance reports for the institutional investment community. Generally, InvestorForce charges its clients minimum quarterly base fees for hosted services. These minimum fees are recognized on a prorated basis over the service term. As the volume of client accounts increases, additional fees apply. These additional fees are recognized in the period in which account volumes exceed the relevant contract minimum. Setup and support and maintenance fees are deferred and recognized ratably over the service term. Revenue for professional services, which consist of the creation of custom platform enhancements, is recognized when the platform is delivered to, and can be used by, the customer.

Concentration of Customer Base and Credit Risk

No customer represented more than 10% of ICG’s consolidated revenue for the three and nine months ended September 30, 2011. For the three months ended September 30, 2010, one customer of ICG Commerce represented approximately 10% of ICG’s consolidated revenue. For the nine months ended September 30, 2010, two customers of ICG Commerce each represented approximately 11% of ICG’s consolidated revenue.

Reclassifications

Certain amounts in the prior-year financial statements have been reclassified to conform to the current presentation. The impact of these changes is not material and did not affect ICG’s net income (loss).

Recent Accounting Pronouncements

In September 2011, the Financial Accounting Standards Board (FASB) issued accounting guidance that permits an entity to first assess qualitative factors regarding whether it is more likely than not that an impairment to the entity’s goodwill exists as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Previous accounting guidance required an entity to test goodwill for impairment on at least an annual basis by comparing the fair value of a reporting unit with its carrying amount including goodwill before performing the second step of the test to measure the amount of the impairment loss, if any. This guidance will become effective for ICG on January 1, 2012. ICG does not expect the adoption of this guidance to have a significant impact on the Consolidated Financial Statements.

In June 2011, the FASB issued accounting guidance related to the presentation of other comprehensive income and its components in the financial statements. This guidance allows an entity the option to present the components of net income and other comprehensive income in either a single continuous statement of comprehensive income or in two separate but consecutive financial statements. This guidance will become effective for ICG on January 1, 2012 and must be applied retrospectively. Other than a change in presentation, ICG does not expect the adoption of this guidance to have a significant impact on the Consolidated Financial Statements.

In May 2011, the FASB issued accounting guidance that amends previous guidance for fair value measurement and disclosure requirements. The revised guidance was issued in connection with new International Financial Reporting Standards (IFRS) that were intended to develop common requirements for measuring fair value and for disclosing information about fair value measurements in accordance with GAAP and IFRS. This guidance clarifies the intent of the application of existing fair value measurement and disclosure requirements, as well as changes certain measurement requirements and disclosures. This guidance will become effective for ICG on January 1, 2012 and must be applied prospectively. ICG does not expect the adoption of this guidance to have a significant impact on the Consolidated Financial Statements.

12

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

3.Goodwill and Intangibles, net

The following table summarizes the activity related to ICG’s goodwill (in thousands):

Goodwill at December 31, 2010	$	20,317
Increase in goodwill due to acquisitions		1,962
Goodwill at September 30, 2011	$	22,279

As of September 30, 2011 and December 31, 2010, all of ICG’s goodwill was allocated to the core segment.

The following table summarizes ICG’s intangible assets from continuing operations (in thousands):

		As of September 30, 2011
Intangible Assets	Useful Life	Gross Carrying Amount Related to Continuing Operations		Accumulated Amortization			Net Carrying Amount
Customer relationships	11 years	$	12,759	$	(2,036	)	$	10,723
Trademarks/trade names	11 years		1,320		(210	)		1,110
Technology	10 years		710		(124	)		586
			14,789		(2,370	)		12,419
Other intellectual property	Indefinite		400		—			400
		$	15,189	$	(2,370	)	$	12,819

		As of December 31, 2010
Intangible Assets	Useful Life	Gross Carrying Amount Related to Continuing Operations		Accumulated Amortization			Net Carrying Amount
Customer relationships	11 years	$	12,759	$	(1,166	)	$	11,593
Trademarks/trade names	11 years		1,320		(120	)		1,200
Technology	10 years		710		(71	)		639
			14,789		(1,357	)		13,432
Other intellectual property	Indefinite		400		—			400
		$	15,189	$	(1,357	)	$	13,832

Amortization expense for intangible assets during the three and nine months ended September 30, 2011 was $0.3 million and $1.0 million, respectively. Amortization expense for the three and nine months ended September 30, 2010 was $0.3 million and $1.0 million, respectively. ICG amortizes intangibles using the straight line method.

Remaining estimated amortization expense is as follows (in thousands):

2011 (remaining three months)	$	338
2012		1,351
2013		1,351
2014		1,351
2015		1,351
Thereafter		6,677
Remaining amortization expense	$	12,419

13

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

3.Goodwill and Intangibles, net – (Continued)

During the nine months ended September 30, 2011, ICG Commerce completed two acquisitions. ICG Commerce is currently in the process of completing the purchase accounting related to these acquisitions. ICG Commerce expects to record goodwill and intangible assets related to these acquisitions. Until the purchase price allocation has been completed, the estimated total amount of intangible assets acquired is included in goodwill.

Impairments

ICG completes its annual impairment testing in the fourth quarter of each year, or more frequently as conditions warrant. There were no impairment charges related to goodwill or intangible assets associated with ICG’s consolidated subsidiaries during the nine-month periods ended September 30, 2011 and 2010, respectively.

4.Consolidated Core Companies

During the three months ended September 30, 2010, ICG increased its equity ownership in ICG Commerce from 76% to 81% by acquiring shares through a tender offer made to ICG Commerce stockholders in July 2010. This ownership increase, coupled with an increase in ICG’s equity ownership from 64% to 76% during the six months ended June 30, 2010 due to ICG’s acquisition of stock from another ICG Commerce stockholder, resulted in aggregate cash consideration paid by ICG to ICG Commerce shareholders of $49.7 million during the nine months ended September 30, 2010. Since ICG increased its equity ownership in ICG Commerce, there was an increase in ICG’s controlling interest and a corresponding decrease in noncontrolling interest ownership. Accordingly, ICG recorded a decrease to “Noncontrolling Interest” on ICG’s Consolidated Statements of Changes in Equity of $10.8 million during the nine months ended September 30, 2010. The remaining purchase price of $38.9 million was recorded as a decrease to “Additional paid-in capital” on ICG’s Consolidated Statements of Changes in Equity during the nine months ended September 30, 2010. These amounts are reflected in the line item “Impact of incremental acquisition of ICG Commerce” on ICG’s Consolidated Statements of Changes in Equity.

Between October 1, 2010 and September 30, 2011, ICG’s equity ownership interest in ICG Commerce did not change substantially. ICG’s equity ownership in ICG Commerce decreased 1% over this period due to various equity compensation transactions during the period (primarily in 2010) and ICG Commerce’s issuance of additional shares of stock in connection with an acquisition in June 2011. The decrease was offset by ICG’s acquisition of a 1% equity interest from other ICG Commerce stockholders in May 2011. The impact of ICG’s acquisition of the additional 1% equity ownership from other ICG Commerce stockholders on ICG’s additional paid-in capital and the noncontrolling interest is reflected in the line item “Impact of incremental acquisition of ICG Commerce” on ICG’s Consolidated Statements of Changes in Equity.

On August 31, 2010, GovDelivery completed the sale of its GovDocs, Inc. subsidiary (“GovDocs”) for aggregate consideration of $1.8 million, which consisted of a combination of cash ($0.7 million), the redemption of shares of GovDelivery’s Series AA Preferred Stock held by the purchaser (valued at $0.8 million) and a secured promissory note (for $0.3 million, which was repaid during the nine months ended September 30, 2011). As a result of GovDelivery’s redemption of shares of its Series AA Preferred Stock in connection with the sale of GovDocs, ICG’s equity ownership interest in GovDelivery increased from 89% to 93% during the three months ended September 30, 2010. There were no changes to ICG’s equity ownership interest in GovDelivery between September 30, 2010 and September 30, 2011.

In connection with the sale of GovDocs, ICG recorded a reduction to goodwill and intangibles, net of accumulated amortization, of $0.3 million and $1.1 million, respectively, during the three months ended September 30, 2010. These assets related to the GovDocs business and had been recorded by ICG as part of its purchase accounting for the acquisition of GovDelivery on December 31, 2009.

The revenue and operating activities of GovDocs prior to the sale have been removed from the line items in which they were reported during the relevant 2010 periods, and the resulting net income of less than $0.1 million and $0.2 million, is included in “Income (loss) from discontinued operations” on ICG’s Consolidated Statements of Operations for the three and nine months ended September 30, 2010, respectively. The sale of GovDocs resulted in a gain of $0.6 million, which is also included in “Income (loss) from discontinued operations” on ICG’s Consolidated Statements of Operations for the three and nine months ended September 30, 2010.

Restricted stock awards granted, partially offset by stock repurchases, at InvestorForce reduced ICG’s equity ownership interest in InvestorForce from 80% to 78% during the three months ended September 30, 2010. Forfeitures of restricted stock by a former employee of InvestorForce increased ICG’s equity ownership in InvestorForce from 78% to 79% during the three months ended September 30, 2011.

14

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

4.Consolidated Core Companies – (Continued)

Revenue, net income (loss) attributable to ICG Group, Inc. and net income (loss) per diluted share attributable to ICG Group, Inc. would have been $30.2 million, $1.8 million and $0.05 per share, respectively, for the three months ended September 30, 2010, had ICG owned 81% of ICG Commerce, 93% of GovDelivery (excluding GovDocs), and 79% of InvestorForce during that entire period. Revenue, net income (loss) attributable to ICG Group, Inc. and net income (loss) per diluted share attributable to ICG Group, Inc. would have been $82.6 million, $46.6 million and $1.28 per share, respectively, for the nine months ended September 30, 2010, had ICG owned 81% of ICG Commerce, 93% of GovDelivery (excluding GovDocs), and 79% of InvestorForce during that entire period. The acquisitions completed by ICG Commerce in 2011 would not have significantly impacted prior period results.

During the three months ended September 30, 2010, ICG Commerce paid a cash dividend in the aggregate amount of $27.0 million on its Series E and E-1 Preferred Stock. The noncontrolling interest received $1.6 million, its share of the dividend based on its ownership of ICG Commerce’s Series E and E-1 Preferred Stock. This dividend, including the equity adjustment to realign the noncontrolling interest ownership that resulted from the disproportionate amount received, resulted in an increase of $3.5 million to ICG’s additional paid-in capital and a decrease of $5.1 million to the noncontrolling interest. These amounts are included in the line item “Impact of subsidiary equity transactions” on ICG’s Consolidated Statements of Changes in Equity for the nine months ended September 30, 2010.

5. Ownership Interests

Equity Method Companies

The following unaudited summarized financial information relates to ICG’s core and venture companies accounted for under the equity method of accounting as of September 30, 2011 and December 31, 2010, and for the three and nine months ended September 30, 2011 and 2010, and has been compiled from the financial statements of those core and venture companies.

Balance Sheets (Unaudited)

	September 30, 2011 (1)		December 31, 2010 (2)
	(in thousands)
Cash and cash equivalents	$	12,728	$	53,160
Other current assets		42,444		63,299
Non-current assets		102,707		157,160
Total assets	$	157,879	$	273,619
Current liabilities	$	73,911	$	119,293
Non-current liabilities		9,877		22,586
Long-term debt		22,687		16,971
Stockholders’ equity		51,404		114,769
Total liabilities and stockholders’ equity	$	157,879	$	273,619
Total carrying value	$	49,635	$	83,829

⁽¹⁾  Includes (ICG voting ownership): Acquirgy (25%), Channel Intelligence (49%), Freeborders (31%), GoIndustry (26%), SeaPass (26%), StarCite (36%) and WhiteFence (36%).

⁽²⁾  Includes (ICG voting ownership): Acquirgy (25%), Channel Intelligence (50%), ClickEquations, Inc. (“ClickEquations”) (33%), Freeborders (31%), GoIndustry (26%), Metastorm Inc. (“Metastorm”) (33%), SeaPass (26%), StarCite (36%) and WhiteFence (36%).

15

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

5. Ownership Interests – (Continued)

As of September 30, 2011, ICG’s aggregate carrying value in its equity method companies exceeded ICG’s share of the net assets of those companies by approximately $33.5 million. Of this excess, $23.6 million has been allocated to goodwill, which is not amortized, and $9.9 million has been allocated to intangibles, which are generally being amortized over periods ranging from three to seven years. As of December 31, 2010, this excess was $47.9 million, $36.5 million of which was allocated to goodwill, and $11.4 million of which was allocated to intangibles. Amortization expense associated with these intangibles was $0.4 million and $1.6 million for the three and nine months ended September 30, 2011, respectively. Amortization expense associated with these intangibles was $0.6 million and $2.0 million for the three and nine months ended September 30, 2010, respectively. This amortization expense is included in the table below in the line item “Amortization of intangible assets” and is included in the line item “Equity loss” on ICG’s Consolidated Statements of Operations.

Results of Operations (Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011(1)			2010(3)			2011 (2)			2010(3)
	(in thousands)						(in thousands)
Revenue	$	39,808		$	59,718		$	132,377		$	174,403
Net income (loss)	$	(8,765	)	$	(7,935	)	$	(26,579	)	$	(26,253	)
Equity loss excluding impairments and amortization of intangible assets	$	(2,797	)	$	(2,308	)	$	(8,436	)	$	(8,904	)
Impairment charge of GoIndustry		—			—			—			(2,914	)
Amortization of intangible assets		(448	)		(644	)		(1,570	)		(2,049	)
Total equity loss	$	(3,245	)	$	(2,952	)	$	(10,006	)	$	(13,867	)

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

⁽²⁾ Includes Acquirgy, Channel Intelligence, ClickEquations (to June 14, 2011, the date of disposition), Freeborders, GoIndustry, Metastorm (to February 17, 2011, the date of disposition), SeaPass, StarCite and WhiteFence.

⁽³⁾ Includes Acquirgy, Channel Intelligence, ClickEquations, Freeborders, GoIndustry, Metastorm, SeaPass, StarCite and WhiteFence.

Impairments – Equity Companies

ICG performs ongoing business reviews of its equity and cost method companies to determine whether ICG’s carrying value in these companies is impaired. ICG determined its carrying value in its equity and cost method companies was not impaired during the three and nine months ended September 30, 2011. During the nine months ended September 30, 2010, ICG recorded impairment charges of $2.9 million to reduce its basis in GoIndustry, a venture company accounted for under the equity method, as a result of declines in the fair value of ICG’s equity holdings in that company during the relevant period. The carrying value of ICG’s ownership interest in GoIndustry was $0.8 million and $2.3 million as of September 30, 2011 and December 31, 2010, respectively. The fair value of ICG’s equity holdings in GoIndustry was $2.1 million and $3.5 million as of September 30, 2011 and December 31, 2010, respectively, based upon the per share closing price for GoIndustry’s common stock on those respective dates.

Other Equity Company Information

On February 17, 2011, Metastorm, one of ICG’s equity core companies, was sold to Open Text Corporation (“Open Text”). ICG’s portion of the sale proceeds was $53.0 million; $51.3 million of those proceeds were received at closing on February 17, 2011, and the remaining proceeds were placed in escrow in connection with a customary indemnification holdback. As a result of this transaction, ICG recorded a gain of $24.9 million during the nine months ended September 30, 2011 that is included in the line item “Other income (loss)” on ICG’s Consolidated Statements of Operations. During the three months ended September 30, 2011, $0.4 million of escrowed proceeds was paid to Open Text; ICG’s share of this amount would have been $0.1 million. ICG will record a gain in the amount of the escrowed proceeds received, if any, in the period in which ICG is entitled to receive such proceeds, the amount is fixed or determinable and realization is assured.

16

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

5. Ownership Interests – (Continued)

On June 14, 2011, Channel Intelligence acquired substantially all of the assets of ClickEquations, primarily in exchange for Channel Intelligence preferred stock that was distributed to ClickEquations’ stockholders, including ICG. The transaction diluted ICG’s ownership in Channel Intelligence and, accordingly, ICG recorded a dilution gain of $0.5 million. Based on the difference between the specified value of the Channel Intelligence preferred stock received by ICG in the transaction and ICG’s carrying value of ClickEquations on the transaction date, ICG recorded a loss on the sale of ClickEquations in the amount of $0.8 million. Both the dilution gain and the loss on the sale transaction are included in the line item “Other income (loss)” on ICG’s Consolidated Statements of Operations for the nine months ended September 30, 2011.

In connection with the Channel Intelligence/ClickEquations transaction, ICG and Channel Intelligence entered into a loan agreement under which Channel Intelligence borrowed $1.0 million from ICG on June 14, 2011. The loan, which matures on June 14, 2014, bears interest at an annual rate of 15% and requires quarterly principal and interest payments beginning in the second quarter of 2012. Under the loan agreement, Channel Intelligence is entitled to borrow an additional $1.5 million from ICG on or before June 11, 2013 to facilitate its operations.

Other

During the three months ended September 30, 2011, ICG paid $5.5 million to acquire a 13% equity ownership interest in a cost method company. ICG’s carrying value of its holdings in cost method companies was $9.7 million and $1.3 million as of September 30, 2011 and December 31, 2010, respectively. Those amounts are reflected in the line item “Cost method investments” on ICG’s Consolidated Balance Sheets in the relevant periods.

ICG owns approximately 9% of Anthem Ventures Fund, L.P. (formerly eColony, Inc.) and Anthem Ventures Annex Fund, L.P. (collectively, “Anthem”), which invest in technology companies. ICG acquired its interest in Anthem in 2000 and currently has no carrying value in Anthem. Accordingly, the receipt of distributions from Anthem by ICG would result in a gain at the time ICG receives those distributions. During the nine months ended September 30, 2011, ICG received a distribution from Anthem in the amount of $1.4 million. See Note 10, “Other Income (Loss).”

Escrow Information

During the nine months ended September 30, 2011, ICG received a distribution of $0.5 million of previously escrowed funds that related to a sale of ICG’s equity holdings in a former cost method company. See Note 10, “Other Income (Loss).”

As of September 30, 2011, ICG had 13,069 outstanding shares of Intercontinental Exchange, Inc. (“ICE”) common stock remaining in escrow; the stock was valued at $1.5 million based on the September 30, 2011 closing stock price of ICE’s common stock. Additionally, ICG had outstanding aggregate cash proceeds, subject to ongoing indemnity claims, of $2.2 million associated with escrowed proceeds from sales of former equity method and cost method companies, including the Metastorm sale. The release of additional escrowed proceeds, if any, to ICG would result in additional gains at the time ICG is entitled to such proceeds, the amount is fixed or determinable and realization is assured.

17

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

6.Financial Instruments

Derivative Financial Instruments

During the three and nine months ended September 30, 2011 and 2010, ICG Commerce utilized average rate currency options with quarterly expirations to mitigate the risk of currency fluctuations at ICG Commerce’s operations in the United Kingdom, Europe, Asia and South America. The net mark-to-market adjustments recognized by ICG Commerce are detailed in the table below and represent the premiums paid for the options by ICG Commerce, as well as the change in value of the options related to the fluctuation of exchange rates during the relevant period.

In 2010, ICG Commerce entered into an interest rate swap hedge agreement with PNC Bank to mitigate the risk of fluctuations in the variable interest rate related to ICG Commerce’s term loan with PNC Bank. The net mark-to-market adjustments recognized by ICG Commerce are detailed in the table below and represent the change in value of the swap related to the fluctuations in the applicable interest rates during the relevant periods. This instrument is set to mature in 2015. See Note 7, “Debt.”

From February 2006 to July 2010, ICG managed its exposure to price fluctuations of Blackboard, Inc. (“Blackboard”) common stock, which is traded on the NASDAQ Global Select Market (NASDAQ: BBBB), through the use of cashless collar contracts. Although these instruments were derivative securities, their economic risks were similar to, and managed on the same basis as, the risks associated with the Blackboard common stock held by ICG. The cashless collar contracts were marked to market through earnings each period, the impact of which is detailed in the table below. The income or loss was primarily driven by the change in the closing price of Blackboard common stock from the beginning to the end of the relevant quarter. The mark-to-market impact was generally expense if Blackboard’s stock price rose, or income if Blackboard’s stock price declined, during the relevant quarter. During the nine months ended September 30, 2010, ICG terminated cashless collar contracts underlying a total of 625,000 shares of Blackboard common stock. Additionally, two other cashless collar contracts underlying a total of 375,000 shares of Blackboard common stock expired during the nine months ended September 30, 2010. There were no cashless collar contracts outstanding as of September 30, 2011 or December 31, 2010.

The following table presents the classifications and fair values of our derivative instruments as of September 30, 2011 and December 31, 2010:

Consolidated Balance Sheets
Derivative	Classification	September 30, 2011			December 31, 2010
		(in thousands)
Average rate currency options	Other assets, net	$	6		$	—
Interest rate swap	Accrued expenses	$	(53	)	$	(12	)

The following table presents the mark-to-market impact on earnings resulting from ICG’s hedging activities for the three- and nine-month periods ended September 30, 2011 and 2010, respectively:

Consolidated Statements of Operations
		Three months ended September 30,						Nine months ended September 30,
Derivatives	Classification	2011			2010			2011			2010
		(in thousands)
Average rate currency options	Other income (loss), net	$	(43	)	$	(76	)	$	(185	)	$	(60	)
Interest rate swap	Interest expense	$	(9	)	$	—		$	(41	)	$	—
Cashless collar contracts	Other income (loss), net	$	—		$	(185	)	$	—		$	547

18

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

6.Financial Instruments – (Continued)

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; they 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 values of ICG’s financial assets measured at fair value on a recurring basis were as follows:

		$112,980			$112,980		$112,980			$112,980
	Balance at September 30, 2011			Level 1		Level 2			Level 3
	(in thousands)
Cash equivalents (money market accounts)	$	112,980		$	112,980	$	—		$	—
Hedges of foreign currency risk *		6			—		6			—
Hedges of interest rate risk *		(53	)		—		(53	)		—
	$	112,933		$	112,980	$	(47	)	$	—
	Balance at December 31, 2010			Level 1		Level 2			Level 3
	(in thousands)
Cash equivalents (money market accounts)	$	81,205		$	81,205	$	—		$	—
Hedges of interest rate risk *		(12	)		—		(12	)		—
	$	81,193		$	81,205	$	(12	)	$	—

* ICG’s respective counterparties under these arrangements provide quarterly statements of the market values of the relevant 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 assets or liabilities.

19

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

7. Debt

Long-Term Debt

ICG’s consolidated long-term debt was $15.9 million and $20.1 million as of September 30, 2011 and December 31, 2010, respectively. This long-term debt relates to ICG’s consolidated core companies and primarily consists of a term loan at ICG Commerce that was entered into in August 2010. The current maturities of long-term debt in the table below are due within one year, and the remaining long-term debt at September 30, 2011 is due at various times through 2015.

		As of
	Interest Rates	September 30, 2011			December 31, 2010
		(in thousands)
ICG Commerce term loan	1.92-3.09%	$	15,667		$	18,667
Capital leases	2.25-12.98%		236			503
Other debt	8.25-10.27%		12			911
			15,915			20,081
Current maturities			(4,230	)		(4,623	)
Long-term debt		$	11,685		$	15,458

Loan and Credit Agreements

On August 3, 2010, ICG Commerce and a number of its wholly-owned subsidiaries entered into a loan agreement with PNC Bank under which the company is able to borrow up to $15.0 million under a revolving line of credit. The line of credit matures on August 2, 2013 and provides for the issuance by the bank of up to $5.0 million of letters of credit, subject to specified fees and other terms. The line of credit is also subject to a 0.25% per annum unused commitment fee that is payable to the bank quarterly. Also on August 3, 2010, ICG Commerce and the other borrowing companies under the line of credit borrowed $20.0 million under a term loan with PNC Bank. The proceeds from the term loan were used to fund a cash dividend paid to certain stockholders of ICG Commerce, including ICG, on August 4, 2010. ICG Commerce paid a nonrefundable $0.2 million commitment fee to PNC Bank upon the consummation of the new line of credit and term loan.

Both the line of credit and the term loan are secured by a first priority lien on the assets of the borrowing companies. The term loan and the line of credit both bear interest at either a base rate equal to the highest of PNC Bank’s prime rate, the sum of the Federal Funds Open Rates plus 0.5% and the sum of the daily LIBOR rate plus 1.0%, or a daily to six month LIBOR rate plus a margin ranging from 1.75% to 2.5% depending on the then-current debt-to-EBITDA ratio of the borrowing companies, at ICG Commerce’s option. On August 6, 2010, ICG Commerce entered into an interest rate swap hedge agreement whereby 50% of the term loan was effectively converted to a fixed interest rate of 1.34% by the hedge agreement. ICG Commerce will still be required to pay the interest rate margin described above on the converted portion of the term loan, which would result in a final interest rate of between 3.09% and 3.84%. The termination date of the hedge agreement is August 1, 2015. ICG Commerce has the right, but not the obligation, to terminate the hedge agreement, without cause and without penalty, on August 1, 2012.

At September 30, 2011, the effective interest rate being paid by ICG Commerce under the term loan, including the applicable margin, was 1.92% for the portion of the loan tied to a floating LIBOR rate and 3.09% for the portion of the loan covered by the interest rate swap hedge agreement. Any outstanding principal and interest under the line of credit will become due and payable periodically through August 2, 2013. The principal under the term loan is payable in $0.3 million monthly installments through August 1, 2015, and any outstanding interest under the term loan will become due and payable periodically through August 1, 2015. Both the line of credit and the term loan are subject to a number of financial and other covenants that are specified in the loan documents. There were no amounts outstanding under the PNC Bank line of credit agreement as of September 30, 2011 or December 31, 2010.

20

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

7. Debt – (Continued)

On December 18, 2009, ICG entered into an amended and restated letter of credit agreement with Comerica Bank (the “LC 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 LC Agreement. On December 17, 2010, the LC Agreement was extended to December 16, 2011. Under the LC Agreement, ICG will pay Comerica Bank issuance fees of 0.50% per annum of the outstanding face amount of each issued letter of credit. The LC 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 the LC Agreement at September 30, 2011 or December 31, 2010.

8. Segment Information

ICG has two reporting segments: the “core” segment and the “venture” segment. Companies in which ICG holds equity or convertible debt interests that are not deemed to be marketable securities are included in either the core or venture segment, while companies in which ICG holds equity interests that have been designated as marketable securities are considered “corporate” assets. At September 30, 2011, the core segment included the results of ICG’s consolidated core companies, recorded ICG’s share of earnings and losses of its equity core companies and captured ICG’s carrying value in its consolidated core companies and equity core companies. At September 30, 2011, the venture segment recorded ICG’s share of earnings and losses of venture companies accounted for under the equity method of accounting and captured ICG’s carrying value in its venture companies.

The core reporting segment includes companies in which ICG’s management takes a very active role in providing strategic direction and management assistance. ICG owns majority controlling equity positions or substantial minority equity positions (i.e., the largest equity positions) in those companies. ICG expects to devote relatively large initial amounts of capital to acquire stakes in core companies, particularly consolidated core companies, since any such acquisition would entail the deployment of cash and/or the issuance of ICG stock to purchase a large equity stake in a target with relatively strong financial characteristics and growth potential. The venture reporting segment includes companies to which ICG generally devotes less capital, holds relatively smaller ownership stakes and generally has less influence over the strategic directions and management decisions than it does with its core companies.

Approximately 7% of ICG’s consolidated revenue for both the three and nine months ended September 30, 2011 relates to sales generated in the United Kingdom, primarily by ICG Commerce. Approximately 7% and 8% of ICG’s consolidated revenue for the three and nine months ended September 30, 2010, respectively, relates to sales generated in the United Kingdom, primarily by ICG Commerce. The remaining consolidated revenues for the three and nine months ended September 30, 2011 and 2010 primarily relate to sales generated in the United States. As of September 30, 2011 and December 31, 2010, ICG’s assets were located primarily in the United States.

On February 17, 2011, Metastorm, which had been an equity core company, was sold. Prior to the sale, ICG’s portion of Metastorm’s net results was included in ICG’s core segment. The amount of equity loss related to Metastorm has been removed from the core segment and is reflected in “Dispositions” in the table below for the three and nine months ended September 30, 2010, as well as for the nine months ended September 30, 2011. In addition, ICG’s basis in Metastorm has been removed from core segment assets and reflected in “Dispositions” as of December 31, 2010 in the table below.

On June 14, 2011, ClickEquations, which had been a venture company accounted for under the equity method, was sold. Prior to the sale, ICG’s portion of ClickEquations’ net results was included in ICG’s venture segment. The amount of equity loss related to ClickEquations has been removed from the venture segment and reflected in “Dispositions” in the table below for the three and nine months ended September 30, 2010 as well as for the nine months ended September 30, 2011. In addition, ICG’s basis in ClickEquations has been removed from venture segment assets and reflected in “Dispositions” as of December 31, 2010 in the table below.

Also included in “Dispositions” in the table below are the net results and the gain on the sale of GovDelivery’s GovDocs subsidiary, which was sold during 2010 and are reported as “Income (loss) from discontinued operations” on ICG’s Consolidated Statements of Operations for the three and nine months ended September 30, 2010.

21

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

8. Segment Information – (Continued)

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

Segment Information
				(in thousands)
										Reconciling Items
	Core			Venture			Total Segment			Dispositions(1)			Corporate			Other(2)		Consolidated Results
Three Months Ended September 30, 2011
Revenues	$	35,142		$	—		$	35,142		$	—		$	—		$	—	$	35,142
Net income (loss) attributable to ICG Group, Inc.	$	834		$	(1,763	)	$	(929	)	$	—		$	(3,303	)	$	1,275	$	(2,957	)
Three Months Ended September 30 , 2010
Revenues	$	30,222		$	—		$	30,222		$	—		$	—		$	—	$	30,222
Net income (loss) attributable to ICG Group, Inc.	$	(1,650	)	$	(797	)	$	(2,447	)	$	(136	)	$	(4,375	)	$	8,749	$	1,791
Nine Months Ended September 30, 2011
Revenues	$	104,424		$	—		$	104,424		$	—		$	—		$	—	$	104,424
Net income (loss) attributable to ICG Group, Inc.	$	1,818		$	(4,392	)	$	(2,574	)	$	(1,001	)	$	(12,288	)	$	25,563	$	9,700
Nine Months Ended September 30, 2010
Revenues	$	82,634		$	—		$	82,634		$	—		$	—		$	—	$	82,634
Net income (loss) attributable to ICG Group, Inc.	$	(6,902	)	$	(2,732	)	$	(9,634	)	$	(2,324	)	$	(13,514	)	$	71,795	$	46,323

⁽¹⁾ Including discontinued operations.

⁽²⁾ Components of Other

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
Corporate other income (loss) (Note 10)	$	39		$	8,978		$	26,504		$	74,379
Noncontrolling interest		(335	)		(229	)		(941	)		(781	)
Impairment of GoIndustry (Venture) (Note 5)		—			—			—			(2,914	)
Income tax benefit (expense) (Note 11)		1,571			—			—			1,111
	$	1,275			8,749		$	25,563		$	71,795

	Core		Venture		Total Segment		Dispositions		Corporate		Other		Consolidated Results
Assets as of:
September 30, 2011	$	166,963	$	7,973	$	174,936	$	—	$	106,470	$	—	$	281,406
Assets as of:
December 31, 2010	$	157,273	$	12,343	$	169,616	$	29,635	$	81,738	$	—	$	280,989

22

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. Equity-Based Compensation

Equity-based compensation for these periods is primarily included in “Selling, general and administrative” on ICG’s Consolidated Statements of Operations. The following table provides additional information related to ICG’s equity-based compensation:

												Weighted
												Average Years
										Unrecognized		Remaining of
										Equity-Based		Equity-Based
	Three Months Ended					Nine Months Ended				Compensation		Compensation
	September 30,					September 30,				at September 30,		Expense at
	2011		2010			2011		2010		2011		Sept. 30, 2011
	(in thousands, except weighted average years)
SARs	$	611	$	496		$	1,645	$	1,540	$	5,839		2.8
Stock Options		—		—			—		—		1		1.2
Restricted Stock		85		(4	)		162		72		1,086		3.4
DSUs		175		54			528		150		305		0.4
Equity-Based Compensation for ICG Group, Inc.	$	871	$	546		$	2,335	$	1,762	$	7,231
Equity-Based Compensation for Consolidated Core Companies		54		162			370		535		1,883		3.9
Equity-Based Compensation	$	925	$	708		$	2,705	$	2,297	$	9,114

Stock Appreciation Rights (SARs)

Each SAR represents the right of the holder to receive, upon exercise of that SAR, shares of ICG Common Stock equal to the amount by which the fair market value of a share of that Common Stock on the date of exercise of the SAR exceeds the base price of the SAR. The base price is determined by the NASDAQ closing price of ICG’s Common Stock on the date of grant (or the closing price on the next trading day if there are no trades in ICG’s stock on the date of grant). The fair value of each SAR is estimated on the grant date using the Black-Scholes option-pricing model. SARs generally vest over four years, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting equally each month over the subsequent 36 months.

During the nine months ended September 30, 2011, ICG granted 275,625 SARs to employees and a non-management director at a weighted-average base price of $12.15 per share and a weighted-average fair value of $6.58 per share. During the nine months ended September 30, 2010, ICG granted 1,406,940 SARs to employees and a non-management director at a weighted-average base price of $6.79 per share and a weighted-average fair value of $3.96 per share. There were no SARs exercised during the three months ended September 30, 2011. During the nine months ended September 30, 2011, 98,057 SARs were exercised. These exercises resulted in the issuance of 19,998 shares of ICG’s Common Stock during the nine months ended September 30, 2011. During the three and nine months ended September 30, 2010, 531,020 SARs and 586,020 SARs, respectively, were exercised, which resulted in the issuance of 139,781 shares and 151,457 shares of ICG’s Common Stock during the respective periods. There were 4,149,453 and 3,971,885 SARs outstanding at September 30, 2011 and December 31, 2010, respectively. The aggregate intrinsic values of the SARs outstanding at September 30, 2011 and December, 31, 2010 were $7.4 million and $27.0 million, respectively.

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. There were no stock options granted during the three and nine months ended September 30, 2011 and 2010. During the three and nine months ended September 30, 2011, 15,300 and 18,725 stock options were exercised, respectively. There were no stock options exercised during the three and nine months ended September 30, 2010. During the three and nine months ended September 30, 2011, 39,619 and 108,736 stock options expired, respectively. During the three and nine months ended September 30, 2010, 1,000 and 26,626 stock options expired, respectively. There were 183,708 and 311,169 stock options outstanding as of September 30, 2011 and December 31, 2010, respectively.

23

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. Equity-Based Compensation – (Continued)

SARs and Stock Options Fair Value Assumptions

ICG estimates the grant date fair value of SARs and stock options 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 estimating volatility of ICG’s stock price over the expected term. Expected volatility approximates the historical volatility of ICG’s Common Stock over the period commensurate with the expected term of the award. The expected term calculation is based on an average of the award vesting 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 ICG’s Consolidated Statements of Operations.

The following assumptions were used to determine the fair value of SARs granted to employees by ICG during the three- and nine-month periods ended September 30, 2011 and 2010, respectively:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011	2010
Expected volatility		—		—	56%	60%
Average expected life of SAR (in years)		—		—	5.25-6.25	2.75-6.25
Risk-free interest rate		—		—	1.62-1.97%	1.55-2.92%
Dividend yield		—		—	0.0%	0.0%

Restricted Stock

During the nine months ended September 30, 2011, ICG granted 66,875 shares of restricted stock to its employees. These awards vest in equal annual installments over four years and were valued at $0.8 million on the date of grant. Also during the nine months ended September 30, 2011, ICG granted 15,035 shares of restricted stock to executives of a consolidated subsidiary. These awards vest after seven years, with the possibility to accelerate the vesting for the achievement of certain performance conditions, and were valued at $0.2 million on the date of grant. The issuance of these awards is included in the line item “Issuance of restricted stock” in ICG’s Consolidated Statements of Changes in Equity. The expense associated with these awards is included in the line item “Equity-based compensation related to restricted stock” in ICG’s Consolidated Statements of Changes in Equity.

The expense associated with the awards granted to executives of a consolidated subsidiary are included in the line item “Equity-Based Compensation for Consolidated Core Companies” in the table above. At the time of grant, ICG believed certain performance conditions related to the awards issued to executives of a consolidated subsidiary were probable of achievement and recorded $0.1 million of expense related to these awards during the six months ended June 30, 2011. During the three months ended September 30, 2011, ICG no longer believed the achievement of these performance conditions was probable. Accordingly, ICG reversed a portion of the expense previously recorded and will record the total expense associated with these awards over the seven-year vesting period.

During the nine months ended September 30, 2010, ICG granted 25,000 shares of restricted stock to one of its employees. This award vests in equal annual installments over four years and was valued at $0.2 million on the date of grant. During the nine months ended September 30, 2011, 6,250 shares of restricted stock vested. During the three and nine months ended September 30, 2010, 525 shares and 3,025 shares of restricted stock vested. There were no forfeitures of restricted stock during the nine months ended September 30, 2011. During the three and nine months ended September 30, 2010, 7,500 shares of restricted stock were forfeited. There were 136,160 and 60,500 shares of restricted stock outstanding at September 30, 2011 and December 31, 2010, respectively.

24

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

9. Equity-Based Compensation – (Continued)

Subsequent to September 30, 2011, the Compensation Committee of ICG granted 550,000 shares of restricted stock to each of Walter W. Buckley, III, ICG’s Chief Executive Officer, and Douglas A. Alexander, ICG’s President. The vesting for each of these grants is as follows. One-third (183,333) of these restricted shares vest upon (1) ICG’s achievement of trailing twelve-month consolidated revenue in excess of $500.0 million at any time on or before December 31, 2015, or (2) ICG’s achievement of its share of trailing twelve-month consolidated adjusted earnings before interest, taxes, depreciation and amortization, excluding equity-based compensation and unusual items in excess of $70.0 million at any time on or before December 31, 2015. If neither of the above financial metrics is met, but ICG achieves at least 75% of either of these targets, a portion (at least 91,667) of these restricted shares vests, with ratable vesting (up to 183,333) for the achievement of any percentage of the financial targets between 75% and 100%. One-third (183,333) of these restricted shares vest if the thirty-day volume weighted average price per share of ICG’s Common Stock equals or exceeds $25.00 at any time prior to December 31, 2015. A portion (91,667) of these restricted shares vests if the $25.00 per share stock price target is not achieved, but ICG’s total stockholder return is in the top 40% of all NASDAQ Component members for the period beginning on the date of grant and ending on December 31, 2015. The remaining one-third (183,334) of these restricted shares vest ratably over four years, commencing in May 2012. In the event of a change of control (as defined by ICG’s Third Amended and Restated 2005 Omnibus Equity Compensation Plan) before December 31, 2015, all of the shares contingent upon the achievement of the financial and stock price metrics automatically vest and any unrecognized equity-based compensation expense associated with those awards would be immediately recognized. These two awards were valued at an aggregate of $11.0 million on the date of grant. ICG will record equity-based compensation expense related to these awards beginning in the fourth quarter of 2011.

Deferred Stock Units (DSUs)

Each DSU represents a share of Common Stock into which that DSU will be converted upon the termination of the recipient’s service at ICG. During the nine months ended September 30, 2011, ICG issued 60,000 DSUs to its non-management directors under the Non-Management Director Compensation Plan (the “Director Plan”); those DSUs were valued at $0.8 million. During the nine months ended September 30, 2011, 7,500 of those DSUs vested in connection with a director’s resignation from ICG’s Board of Directors.

The remaining 52,500 DSUs are expected to vest in the first quarter of 2012. During the nine months ended September 30, 2010, ICG issued 36,000 DSUs to its non-management directors under the Director Plan, which were valued at $0.2 million. During the nine months ended September 30, 2010, 4,500 of those DSUs were forfeited; the remaining 31,500 DSUs vested during the nine months ended September 30, 2011.

ICG issues quarterly compensation payments to each non-management director for his service on the Board of Directors and its committees under the Director Plan. Each director had the right to elect to receive such payments in whole or in part in the form of DSUs in lieu of cash. Each participating director receives DSUs representing shares of ICG’s Common Stock with a fair market value equal to the relevant cash fees (with such fair market value determined by reference to the closing Common Stock price reported by NASDAQ on the date these cash fees otherwise would have been paid). These DSUs vest immediately. The expense for these DSUs is recorded when the fees to which the DSUs relate are earned.

During the three and nine months ended September 30, 2011, ICG issued 2,759 DSUs and 8,493 DSUs, respectively, to ICG’s non-management directors. During the three and nine months ended September 30, 2010, ICG issued 6,543 DSUs and 21,359 DSUs, respectively, to ICG’s non-management directors. The expense of less than $0.1 million and $0.1 million for the three and nine months ended September 30, 2011, respectively, and the expense of $0.1 million and $0.2 million for the three and nine months ended September 30, 2010, respectively, associated with the quarterly grants for service is included in the line item “Selling, General and Administrative” in ICG’s Consolidated Statements of Operations (but is not reflected in the summary Equity-Based Compensation table above).

Consolidated Core Companies

ICG’s consolidated core companies recorded $0.1 million and $0.4 million of compensation expense related to equity-based awards during the three and nine months ended September 30, 2011, respectively. ICG’s consolidated core companies, primarily ICG Commerce, recorded $0.2 million and $0.5 million of compensation expense related to equity-based awards during the three and nine months ended September 30, 2010, respectively. ICG Commerce’s stock options generally vest over four years, with 25% vesting on the first anniversary of the grant date and the remaining 75% vesting equally each month over the next 36 months. The fair value of each of ICG Commerce’s option awards was estimated on the grant date using the Black-Scholes option pricing model.

25

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

10. Other Income (Loss)

Other Income (Loss), net

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

	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011			2010
	(in thousands)
Gain on sale of Metastorm (Note 5)	$	—		$	—		$	24,853		$	—
Loss on sale of ClickEquations (Note 5)		—			—			(803	)		—
Realized gains on marketable securities, net of hedge termination costs of $0.2 million		—			9,155			—			66,952
Unrealized gain (loss) on mark-to-market of hedges (Note 6)		—			(185	)		—			547
Gain on sale of Creditex		—			—			—			5,089
Gains on sales/distributions of ownership interests		36			—			567			1,836
Dilution gain (loss) on equity method companies		23			—			496			(67	)
Gains on other distributions		—			—			1,424			—
Other		(20	)		8			(33	)		22
		39			8,978			26,504			74,379
Total other income (loss) for consolidated core companies		(413	)		218			(320	)		(260	)
	$	(374	)	$	9,196		$	26,184		$	74,119

Marketable securities represent ICG’s holdings in publicly-traded equity securities accounted for as available-for-sale securities. At September 30, 2011 and December 31, 2010, ICG did not hold interests in any marketable securities. ICG held a noncontrolling interest in Blackboard throughout the three and nine months ended September 30, 2010. During the three and nine months ended September 30, 2010, ICG sold 250,000 shares and 1,619,571 shares, respectively, of Blackboard common stock at average prices per share of $38.00 and $42.87, respectively. ICG received proceeds of $9.5 million and $69.4 million during the three and nine months ended September 30, 2010, respectively, and recognized a gain on the sale of these securities in the amount of $9.1 million and $67.0 million in those respective periods; those gains are included in the line item “Realized gains on marketable securities, net of hedge termination costs of $0.2 million” in the table above.

During the nine months ended September 30, 2010, 47,056 shares of ICE common stock were released from an escrow account that had been established as part of ICE’s acquisition of Creditex Group, Inc. (“Creditex”); ICG had accounted for its equity ownership interest in Creditex under the cost method of accounting. The aggregate value of these shares of common stock, based on the stock’s closing price on the respective dates these shares were released to ICG, was $5.1 million. ICG recorded a gain during the nine months ended September 30, 2010 of $5.1 million, which is reflected in the line item “Gain on sale of Creditex” in the table above. ICG sold the newly-acquired shares for aggregate proceeds of $5.2 million and, accordingly, recorded an incremental gain on the sale of $0.1 million during the nine-month period ended September 30, 2010, which is included in the line item “Realized gains on marketable securities, net of hedge termination costs of $0.2 million” in the table above.

During the three months ended September 30, 2011, ICG received a final distribution of funds of less than $0.1 million, which related to a former equity method company. Additionally, during the nine months ended September 30, 2011, ICG received a distribution of $0.5 million of previously escrowed funds, which related to a sale of ICG’s equity holdings in a former cost method company. During the nine months ended September 30, 2010, ICG received $1.8 million of escrow releases in connection with the prior disposition of its ownership interests in certain other companies. These amounts are recorded as gains in the respective periods, and are included in the line item “Gains on sales/distributions of ownership interests” in the table above.

26

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

10. Other Income (Loss) – (Continued)

Amounts included in the line item “Dilution gain (loss) on equity method companies” for the nine months ended September 30, 2011 in the table above primarily relate to the dilution gain of $0.5 million due to the change in ICG’s equity ownership in Channel Intelligence as a result of the sale of substantially all the assets of ClickEquations to Channel Intelligence on June 14, 2011. See Note 5, “Ownership Interests.”

During the nine months ended September 30, 2011, ICG received a distribution from Anthem in the amount of $1.4 million. This amount was recorded as a gain and is included in the line item “Gains on other distributions” in the table above.

During the three- and nine-month period ended September 30, 2011, ICG Commerce recorded foreign currency losses of $0.4 million and $0.3 million related to changes in exchange rates associated with its operations in the United Kingdom, Europe, Asia and South America. During the three and nine months ended September 30, 2010, ICG Commerce recorded foreign currency gains of $0.2 million and foreign currency losses of $0.3 million, respectively, related to changes in exchange rates associated with its operations in the United Kingdom, Europe, Asia and South America. These foreign currency gains and losses, which include the mark-to-market adjustments related to the average rate currency options utilized by ICG Commerce (see Note 6, “Financial Instruments”), comprise the majority of the other income (loss) for ICG’s consolidated core companies included in the table above.

11. Income Taxes

ICG, ICG Commerce, InvestorForce and GovDelivery file a consolidated federal income tax return. For the nine months ended September 30, 2011, the effective tax rate was -5.8%, excluding discrete items. This differs from the statutory rate of 35%, primarily due to the valuation allowance that is maintained on certain deferred tax assets. In the three months ended September 30, 2011, ICG recorded a net deferred tax benefit of $1.6 million, primarily due to a tax loss related to a former equity method company that was dissolved in the period. In the nine months ended September 30, 2011, ICG recorded net deferred tax benefit of $0.1 million on discrete items primarily due to interest received on the federal tax refund ICG received during 2011 and the offsetting effect of equity method companies that were disposed of or dissolved during the nine-month period. ICG recorded a tax benefit of $1.2 million for the nine months ended September 30, 2010. This benefit was attributable to $0.7 million of interest related to a portion of the tax receivable that was paid by the Internal Revenue Service (IRS) during the nine months ended September 30, 2010, as well as a provision to return adjustment of $0.5 million to reflect the actual net operation loss carryback related to the 2009 tax year. As discussed in Note 4, “Consolidated Core Companies,” in July 2010, ICG acquired an additional equity interest in ICG Commerce. As a result of this acquisition, ICG Commerce now joins ICG’s consolidated federal income tax return. One effect of this transaction was to reduce the amount of Section 382 limited net operating losses available to ICG Commerce by $2.6 million in that period. For the 2010 period during which ICG Commerce did not join in the consolidated federal income tax return with ICG, ICG Commerce recorded income tax expense of $2.9 million and $4.3 million, respectively, representing an effective tax rate of 49.7%. This rate differed from the federal rate of 35% due to foreign and state taxes offset by the increased valuation allowance due to the aforementioned reduction in available net operating losses.

As a result of a change in ownership of ICG under Internal Revenue Code Section 382 that occurred in 2004, ICG’s net operating loss carryforwards and capital loss carryforwards are subject to an annual limitation. The annual limitation on the utilization of these carryforwards is approximately $14.5 million per year. This annual limitation can be carried forward if it is not used in a particular year. The amount available for 2011 is $14.5 million and the total amount available through 2023, when the losses subject to this limitation expire, is $188.8 million.

As a result of a change in ownership of ICG Commerce under Internal Revenue Code Section 382 that occurred in 2003, ICG Commerce’s net operating loss carryforwards are subject to an annual limitation. The annual limitation ICG Commerce has on the utilization of its net operating losses is $3.1 million per year. The amount available in 2011 is $34.3 million and the total amount available through 2022, when the losses subject to this limitation expire, is $68.8 million.

Additionally, ICG has $32.3 million of net operating loss carryforwards that are not subject to the Section 382 annual limitation. These net operating losses expire between 2026 and 2029.

A valuation allowance has been provided for the portion of ICG’s net deferred tax assets that ICG believes, after evaluating all positive and negative evidence, both historical and prospective, is more likely than not to not be realized.

As of December 31, 2010, ICG was entitled to an income tax refund of $6.3 million, which was received during the nine months ended September 30, 2011. Interest related to this refund in the amount of $0.2 million was received during the nine months ended September 30, 2011 and is included in the line item “Income tax (expense) benefit” in ICG’s Consolidated Statements of Operations in the relevant period.

27

ICG 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 September 30,					Nine Months Ended September 30,
	2011			2010		2011		2010
	(in thousands, except per share data)
Basic and Diluted:
Income (loss) from continuing operations	$	(2,957	)	$	1,339	$	9,700	$	45,711
Income (loss) from discontinued operations		—			452		—		612
Net income (loss) attributable to ICG Group, Inc.	$	(2,957	)	$	1,791	$	9,700	$	46,323
Basic:
Income (loss) from continuing operations per share	$	(0.08	)	$	0.04	$	0.26	$	1.25
Income (loss) from discontinued operations per share		—			0.01		—		0.02
Net income (loss) attributable to ICG Group, Inc. per share	$	(0.08	)	$	0.05	$	0.26	$	1.27
Diluted:
Income (loss) from continuing operations per share	$	(0.08	)	$	0.04	$	0.26	$	1.24
Income (loss) from discontinued operations per share		—			0.01		—		0.02
Net income (loss) attributable to ICG Group, Inc. per share	$	(0.08	)	$	0.05	$	0.26	$	1.26
Shares used in computation of basic income (loss) per share		36,556			36,368		36,819		36,340
Stock options		—			60		93		40
Restricted stock		—			18		23		10
DSUs		—			19		13		9
SARs		—			491		790		280
Shares used in the computation of diluted income (loss) per share		36,556			36,956		37,738		36,679

28

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

12. Net Income (Loss) per Share – (Continued)

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

	Units		Weighted Average Price Per Unit
	(in thousands)
Three Months Ended September 30, 2011
Stock options		184	$	6.26
Restricted stock		136	$	—
Deferred stock units		53	$	—
SARs		4,149	$	7.71
Three Months Ended September 30, 2010
Stock options		300	$	29.81
Restricted stock		—	$	—
Deferred stock units		—	$	—
SARs		1,995	$	7.45
Nine Months Ended September 30, 2011
Stock options		2	$	15.80
Restricted stock		82	$	—
Deferred stock units		—	$	—
SARs		1,890	$	7.94
Nine Months Ended September 30, 2010
Stock options		300	$	29.81
Restricted stock		—	$	—
Deferred stock units		—	$	—
SARs		1,995	$	7.45

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, ICG’s primary source of comprehensive loss was net unrealized holding gains (losses) related to its marketable securities.

The following table summarizes the components of comprehensive loss:

	Three Months Ended September  30,						Nine Months Ended September  30,
	2011			2010			2011		2010
	(unaudited)
	(in thousands)
Net income (loss)	$	(2,622	)	$	2,020		$	10,641	$	47,104
Other comprehensive income (loss):
Unrealized holding gains (losses) in marketable securities		—			158			—		(4,055	)
Reclassification adjustments/realized net gains on marketable securities		—			(9,127	)		—		(67,114	)
Other accumulated other comprehensive income (loss)		24			(28	)		9		7
Comprehensive income (loss)		(2,598	)		(6,977	)		10,650		(24,058	)
Less: Comprehensive income attributable to the noncontrolling interest		359			203			950		790
Comprehensive income (loss) attributable to ICG Group, Inc.	$	(2,957	)	$	(7,180	)	$	9,700	$	(24,848	)

29

ICG GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

14. Redeemable Noncontrolling Interest

Certain GovDelivery Series AA Preferred stockholders have the ability to force GovDelivery to redeem their Series AA Preferred shares beginning in 2013. Because that redemption is outside the control of GovDelivery, ICG has classified this noncontrolling interest outside of equity and will accrete to its estimated redemption value with an offset to additional paid-in capital. This noncontrolling interest is classified as “Redeemable noncontrolling interest” on ICG’s Consolidated Balance Sheets.

The following reconciles the activity related to the redeemable noncontrolling interest during the nine months ended September 30, 2011 and 2010 (in thousands):

Balance at December 31, 2009	$	1,420
Redeemable noncontrolling interest portion of net subsidiary income/(loss)		88
Accretion to estimated redemption value		161
Impact of subsidiary equity transactions (primarily related to GovDocs transaction)		(497	)
Balance at September 30, 2010	$	1,172
Balance at December 31, 2010	$	1,182
Redeemable noncontrolling interest portion of net subsidiary income/(loss)		(156	)
Accretion to estimated redemption value		309
Impact of subsidiary equity transactions		(9	)
Balance at September 30, 2011	$	1,326

15. Share Repurchase Program

In accordance with ICG’s $25.0 million share repurchase program, ICG may repurchase, from time to time, shares of ICG’s 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. During the three and nine months ended September 30, 2011, ICG repurchased 774,327 and 841,027 shares of Common Stock, respectively, at average purchase prices of $10.06 per share and $10.17 per share in the respective period. ICG did not make any repurchases of Common Stock during the nine months ended September 30, 2010. Since commencement of this program and through September 30, 2011, ICG has repurchased a total of 3,281,427 shares of Common Stock at an average purchase price of $6.24 per share. As of September 30, 2011, ICG may repurchase an additional $4.5 million of ICG’s Common Stock under this program. All repurchases are reflected in “Treasury stock, at cost” as a reduction of Stockholders’ Equity on ICG’s Consolidated Balance Sheets in the relevant period.

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

Introduction

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

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

Executive Summary

We focus on acquiring and building SaaS and technology-enabled BPO companies that improve the productivity and efficiency of their business customers. The results of operations of the companies in which we hold convertible debt or equity interests are reported within two segments: the “core” reporting segment and the “venture” reporting segment. Our core reporting segment includes those companies in which our management takes a very active role in providing strategic direction and management assistance. We own majority controlling equity positions in (and therefore consolidate the financial results of) three of these core companies, which we call our “consolidated core companies.” We own substantial minority equity positions (i.e., the largest equity positions) in our other core companies, which we call our “equity core companies.” We expect to devote relatively large initial amounts of capital to acquire stakes in our core companies, particularly consolidated core companies, since any such acquisition would entail the deployment of cash and/or issuance of ICG stock to purchase a large equity stake in a target with relatively strong financial characteristics and growth potential. As of September 30, 2011 and the date of this Report, we hold ownership interests in seven companies that we consider core companies.

Our venture reporting segment includes companies (“venture 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. As a result, we generally have less influence over the strategic direction and management decisions of our venture companies than we do over those of our core companies. As of September 30, 2011 and the date of this Report, we hold ownership interests in three companies that we consider venture companies.

The convertible debt and equity interests that we acquire 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 company. Generally, if we own more than 50% of the outstanding voting securities of a company, and other stockholders do not possess the right to affect the significant operational management decisions of that company, the company’s accounts are reflected in our Consolidated Financial Statements. Generally, if we own between 20% and 50% of the outstanding voting securities of a company, that company’s accounts are not reflected in our Consolidated Financial Statements, but our share of the earnings or losses of the company is reflected in the caption “Equity loss” in our Consolidated Statements of Operations. 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.

31

Because we own significant interests in a number of companies that are in different stages of profitability, we have experienced, and expect to continue to experience, significant volatility in our quarterly results. While many of our core and venture 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 various ownership interests. 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 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 debt as of September 30, 2011 and December 31, 2010:

	September 30, 2011			December 31, 2010
Cash and cash equivalents	$	117,817		$	92,438
Restricted cash		140			201
	$	117,957		$	92,639
Debt	$	(15,915	)	$	(20,081	)

We believe existing cash and cash equivalents, proceeds from the potential sales of all or a portion of our equity ownership interests in private companies and issuances of our Common Stock to be sufficient to fund our cash requirements for the foreseeable future, including any future commitments to our companies, debt obligations and general operating requirements. As of the date of this filing, we were not obligated for any material funding or guarantee commitments to existing companies in which we hold convertible debt or equity securities. We will continue to evaluate acquisition opportunities and may acquire additional ownership interests in new and existing companies during 2011 and thereafter; 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 and borrowing. GovDelivery and ICG Commerce expect that their existing cash balances and cash flow from operations will be sufficient to fund their respective operations, including the repayment of debt obligations, for the foreseeable future. Currently, InvestorForce is expected to require additional borrowings, most likely from ICG, to fund its future operations. From time to time, GovDelivery, ICG Commerce and InvestorForce evaluate various acquisition opportunities, any of which may require additional equity financing and/or borrowings from ICG.

Our consolidated working capital increased $22.0 million, from $97.2 million as of December 31, 2010 to $119.2 million as of September 30, 2011. This increase is primarily attributable to the increase in cash from December 31, 2010 to September 30, 2011 due to the receipt of $51.3 million in proceeds related to the Metastorm disposition and cash provided by general operating activities at ICG and our consolidated subsidiaries, partially offset by the acquisition of ownership interests and cost method companies by ICG and repayments of long-term debt by our consolidated subsidiaries, including capital leases.

32

Summary of Statements of Cash Flows – from continuing operations

	Nine Months Ended September 30,						Better/			Better/
	2011			2010			(Worse)			(Worse)
	(in thousands)						(in thousands)			(percentage)
Cash provided by (used in) operating activities	$	956		$	(5,438	)	$	6,394			118
Cash provided by (used in) investing activities	$	38,620		$	71,757		$	(33,137	)		(46	)
Cash provided by (used in) financing activities	$	(14,112	)	$	(31,644	)	$	17,532			55

The change from cash flows used in operating activities to cash flows provided by operating activities primarily relates to cash received from the IRS of $6.3 million during the nine months ended September 30, 2011 compared to net cash received from the IRS of $4.6 million during the nine months ended September 30, 2010. Other changes in working capital also contributed to the improvement in the 2011 period.

The decrease in cash flows provided by investing activities primarily relates to an increase in cash paid for acquisitions in 2011 of approximately $9.9 million and the absence of proceeds from sales of marketable securities in the 2011 period, which amounted to $74.4 million in the nine-month period ended September 30, 2010. These changes were partially offset by the $53.3 million of proceeds from the sale of Metastorm and other distributions received in 2011 compared to $1.8 million of proceeds from the sale of former equity ownership interests that were received in the 2010 period.

Cash flows used in financing activities during the nine months ended September 30, 2011 were lower than the nine months ended September 30, 2010 primarily due to the 2010 acquisition of an incremental 17% equity ownership in ICG Commerce, partially offset by borrowings of long-term debt in the 2010 period and increased repayments of long-term debt and the purchase of treasury stock in the 2011 period.

From time to time, we and our consolidated subsidiaries are involved in various claims and legal actions arising in the ordinary course of business. We do not expect any liability with respect to any such actions that would 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 during the three and nine months ended September 30, 2011.

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, expenses, results of operations, liquidity, capital expenditures or capital resources.

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Our Companies

As of September 30, 2011, we held equity interests in 10 companies that we consider part of our core and venture segments. These companies are categorized below based on segment and method of accounting.

CORE COMPANIES (% Voting Interest)
Consolidated	Equity
GovDelivery (93%)	Channel Intelligence (49%)
ICG Commerce (81%)	Freeborders (31%)
InvestorForce (79%)	StarCite (36%)
	WhiteFence (36%)
VENTURE COMPANIES (% Voting Interest)
Consolidated	Equity
(none)	Acquirgy (25%)
	GoIndustry (26%)(1)
	SeaPass (26%)

⁽¹⁾ As of September 30, 2011 and the date of this Report, we owned 2,546,743 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 5, “Ownership Interests,” to our Consolidated Financial Statements.

Results of Operations

The following table summarizes the unaudited selected financial information related to our segments. Each segment includes the results of our consolidated core companies and records our share of the earnings and losses of core and venture companies accounted for under the equity method of accounting. The companies included within the segments are consistent between periods, with the exception of the disposition of Metastorm, an equity core company, that occurred in February 2011 and the disposition of ClickEquations, a venture company accounted for using the equity method, that occurred in June 2011. The method of accounting for any particular company may change based on our ownership interest.

“Dispositions” refers to those companies that have been sold or ceased operations and are no longer included in a segment for the periods presented. We consider dispositions to be either the sale of a division, subsidiary or asset group of our consolidated core companies, typically classified as discontinued operations for accounting purposes, or the disposition of our ownership interest in a core or venture company accounted for under the equity method of accounting. The amount presented as “Dispositions” below for the three months ended September 30, 2010 includes a subsidiary of GovDelivery that was sold on August 31, 2010. The amount presented as “Dispositions” below for the nine months ended September 30, 2011 includes ClickEquations (sold on June 14, 2011) and Metastorm (sold on February 17, 2011). The amount presented as “Dispositions” below for the nine months ended September 30, 2010 includes ClickEquations, Metastorm and the subsidiary of GovDelivery.

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

34

Segment Information
(in thousands)
										Reconciling Items
	Core			Venture			Total Segment			Dispositions(1)			Corporate			Other		Consolidated Results
Three Months Ended September 30, 2011
Revenues	$	35,142		$	—		$	35,142		$	—		$	—		$	—	$	35,142
Net income (loss) attributable to ICG Group, Inc.	$	834		$	(1,763	)	$	(929	)	$	—		$	(3,303	)	$	1,275	$	(2,957	)
Three Months Ended September 30 , 2010
Revenues	$	30,222		$	—		$	30,222		$	—		$	—		$	—	$	30,222
Net income (loss) attributable to ICG Group, Inc.	$	(1,650	)	$	(797	)	$	(2,447	)	$	(136	)	$	(4,375	)	$	8,749	$	1,791
Nine Months Ended September 30, 2011
Revenues	$	104,424		$	—		$	104,424		$	—		$	—		$	—	$	104,424
Net income (loss) attributable to ICG Group, Inc.	$	1,818		$	(4,392	)	$	(2,574	)	$	(1,001	)	$	(12,288	)	$	25,563	$	9,700
Nine Months Ended September 30, 2010
Revenues	$	82,634		$	—		$	82,634		$	—		$	—		$	—	$	82,634
Net income (loss) attributable to ICG Group, Inc.	$	(6,902	)	$	(2,732	)	$	(9,634	)	$	(2,324	)	$	(13,514	)	$	71,795	$	46,323

⁽¹⁾  Including discontinued operations.

For the Three and Nine Months Ended September 30, 2011 and 2010

Results of Operations – Core Companies

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

	Three Months Ended September 30,						Three-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Selected data:
Revenues	$	35,142		$	30,222		$	4,920			16
Cost of revenue		(21,128	)		(18,056	)		(3,072	)		(17	)
Selling, general and administrative		(7,002	)		(6,367	)		(635	)		(10	)
Research and development		(3,091	)		(2,729	)		(362	)		(13	)
Amortization of intangible assets		(338	)		(342	)		4			1
Impairment related and other		(484	)		(208	)		(276	)		(133	)
Operating expenses		(32,043	)		(27,702	)		(4,341	)		(16	)
Interest and other		(550	)		108			(658	)		(609	)
Income tax (expense) benefit		(233	)		(2,860	)		2,627			92
Equity loss		(1,482	)		(1,418	)		(64	)		(5	)
Net income (loss)	$	834		$	(1,650	)	$	2,484			151

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	Nine Months Ended September 30,						Nine-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Selected data:
Revenues	$	104,424		$	82,634		$	21,790			26
Cost of revenue		(63,893	)		(52,381	)		(11,512	)		(22	)
Selling, general and administrative		(21,313	)		(18,268	)		(3,045	)		(17	)
Research and development		(9,545	)		(7,798	)		(1,747	)		(22	)
Amortization of intangible assets		(1,013	)		(1,020	)		7			<1
Impairment related and other		(603	)		(376	)		(227	)		(60	)
Operating expenses		(96,367	)		(79,843	)		(16,524	)		(21	)
Interest and other		(762	)		(422	)		(340	)		(81	)
Income tax (expense) benefit		(864	)		(4,176	)		3,312			79
Equity loss		(4,613	)		(5,095	)		482			9
Net income (loss)	$	1,818		$	(6,902	)	$	8,720			126

Revenue

The increase in revenue in both the three- and nine-month periods ended September 30, 2011 is due to revenue growth at all three of our consolidated subsidiaries arising from new customers and increased business with existing customers compared to the three- and nine-month periods ended September 30, 2010. The largest contributor of this revenue growth was at ICG Commerce, which experienced 14% and 23% higher revenues in the three and nine months ended September 30, 2011, respectively, than in the comparable 2010 periods. Revenue growth at ICG Commerce was lower than originally expected due to delays in contract signings in the three-month period ended September 30, 2011. In addition, purchase price adjustments decreasing revenue at GovDelivery for deferred revenue limitations (which amounted to $0.4 million and $1.9 million for the three and nine months ended September 30, 2010, respectively) related to, and were recorded during, 2010 only.

Operating Expenses

The increase in operating expenses in both the three- and nine-month periods is the result of increased cost of revenue at ICG Commerce, which is primarily attributable to the increase in revenue at that company. This increase is also due to costs associated with increased headcount at ICG Commerce, increased sales efforts and product development at GovDelivery and increased product development costs at InvestorForce.

Interest and Other

The increase in interest and other expenses in the three- and nine-month periods ended September 30, 2011 compared to the 2010 periods is due to increased foreign currency charges at ICG Commerce, and increased interest expense related to that company’s term loan.

Income Tax (Expense) Benefit

The decrease in income tax expense from the three and nine months ended September 30, 2010 to the three and nine months ended September 30, 2011 relates to ICG Commerce. See subsection “Income Tax (Expense) Benefit” under the “Other” heading in “Results of Operations – Reconciling Items” for more information.

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Equity Loss

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

	Three Months Ended September 30,						Three-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Selected data:
Total revenues	$	29,711		$	28,507		$	1,204			4
Total net loss	$	(2,837	)	$	(2,556	)	$	(281	)		(11	)
Our share of total net loss	$	(1,201	)	$	(1,002	)	$	(199	)		(20	)
Amortization of intangible assets		(281	)		(416	)		135			32
Equity loss	$	(1,482	)	$	(1,418	)	$	(64	)		(5	)

	Nine Months Ended September 30,						Nine-Month Period Change
	2011			2010
	(in thousands)						(in thousands)		(percentage)
Selected data:
Total revenues	$	87,202		$	82,277		$	4,925		6
Total net loss	$	(8,639	)	$	(9,786	)	$	1,147		12
Our share of total net loss	$	(3,561	)	$	(3,838	)	$	277		7
Amortization of intangible assets		(1,052	)		(1,257	)		205		16
Equity loss	$	(4,613	)	$	(5,095	)	$	482		9

Revenue for the three and nine months ended September 30, 2011 at each of our core equity companies was either consistent with, or an increase from, the corresponding periods in 2010. Aggregate net loss and, accordingly, our share of total net loss, increased during the three months ended September 30, 2011 from the comparable 2010 period primarily due to an increase in costs related to the sales and marketing efforts, as well as product development, at certain of our core equity companies during the three-month 2011 period. However, aggregate net loss and, accordingly, our share of total net loss, decreased during the nine months ended September 30, 2011 from the comparable 2010 period due to increases in revenue, partially offset by increases in sales and marketing, as well as product development costs that were concentrated in the three-month 2011 period.

Results of Operations – Venture Companies

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

	Three Months Ended September  30,						Three-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Selected data:
Our share of total net loss	$	(1,596	)	$	(630	)	$	(966	)		(153	)
Amortization of intangible assets		(167	)		(167	)		—			—
Equity loss	$	(1,763	)	$	(797	)	$	(966	)		(121	)

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	Nine Months Ended September 30,						Nine-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Selected data:
Our share of total net loss	$	(3,891	)	$	(2,231	)	$	(1,660	)		(74	)
Amortization of intangible assets		(501	)		(501	)		—			—
Equity loss	$	(4,392	)	$	(2,732	)	$	(1,660	)		(61	)

Equity income (loss) for the three and nine months ended September 30, 2011 and 2010 relates to our share of the net results of our venture companies accounted for under the equity method. The increase in equity loss attributable to our venture companies for the three and nine months ended September 30, 2011 from the comparable 2010 periods is due to a decline in net results at each of these companies.

Results of Operations – Reconciling Items

Dispositions (including Discontinued Operations)

On June 14, 2011, substantially all of the assets of ClickEquations were sold to Channel Intelligence. We recorded equity loss of $0.7 million representing our share of ClickEquations’ results for the nine months ended months ended September 30, 2011. We recorded equity loss of $0.2 million and $0.7 million representing our share of ClickEquations’ results for the three and nine months ended September 30, 2010, respectively. Since ClickEquations was a venture company accounted for under the equity method, our share of ClickEquations’ results has been removed from the results of our venture segment and are included in “Dispositions” in the “Results of Operations” segment information table above for the periods previously discussed.

On February 17, 2011, Metastorm was sold to Open Text. We recorded equity loss related to our share of Metastorm’s results of $0.3 million for the nine months ended September 30, 2011. Equity loss related to our share of Metastorm’s results was $0.5 million and $2.1 million for the three and nine months ended September 30, 2010, respectively. Additionally, we recorded less than $0.1 million of ICG’s intangible asset amortization related to Metastorm in the nine months ended September 30, 2011. ICG’s intangible asset amortization related to Metastorm was $0.1 million and $0.3 million for the three- and nine-month periods ended September 30, 2010, respectively. Since Metastorm was an equity core company, our share of Metastorm’s results and the related ICG intangible asset amortization has been removed from the results of our core segment and are included in “Dispositions” in the “Results of Operations” segment information table above for the periods previously discussed.

On August 31, 2010, GovDelivery sold its GovDocs subsidiary for aggregate consideration of $1.8 million. GovDocs had revenue of $0.1 million and net income, including purchase price adjustments and intangible amortization, of less then $0.1 million, for the period from July 1, 2010 through August 31, 2010. GovDoc’s revenue and net income, including purchase price adjustments and intangible amortization, was $1.4 million and $0.2 million, respectively, for the period from January 1, 2010 through September 30, 2010. Prior to the sale, these results had been included in our core segment. Additionally, a gain on the sale of GovDocs in the amount of $0.6 million was recognized during the three and nine months ended September 30, 2010. GovDocs’ revenue and operating results from those periods have been separated from continuing operations and are presented, along with the gain on the sale, in the single line item “Income (loss) from discontinued operations,” in our Consolidated Statements of Operations; these net results are included in “Dispositions” in the “Results of Operations” segment information table for the three and nine months ended September 30, 2010.

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Corporate

		0000000			0000000			0000000		0000000
	Three Months Ended September 30,						Three-Month Period Change
	2011			2010
	(in thousands)						(in thousands)		(percentage)
General and administrative	$	(3,385	)	$	(3,622	)	$	237		7
Impairment related and other		—			(796	)		796		100
Interest income (expense), net		82			43			39		91
Net loss	$	(3,303	)	$	(4,375	)	$	1,072		25

	Nine Months Ended September 30,						Nine-Month Period Change
	2011			2010
	(in thousands)						(in thousands)		(percentage)
General and administrative	$	(12,776	)	$	(12,943	)	$	167		1
Impairment related and other		—			(796	)		796		100
Interest income (expense), net		263			225			38		17
Income tax (expense) benefit		225			—			225		100
Net loss	$	(12,288	)	$	(13,514	)	$	1,226		9

The decrease in general and administrative expenses is primarily due to a decrease in employee-related expenses, primarily bonuses, of $0.6 million as well as a decrease in other outside service costs of $0.2 million, partially offset by an increase in equity-based compensation charges of $0.6 million. Impairment related and other expenses for the three and nine months ended September 30, 2010 relate to severance costs related to two employees that no longer provide services to ICG. Interest income increased slightly in the current three- and nine-month periods ended September 30, 2011 due to higher cash balances in 2011. The income tax benefit in the 2011 period relates to the receipt of an income tax refund that exceeded the $6.3 million income tax receivable recorded by ICG as of December 31, 2010.

Other

	Three Months Ended September  30,						Three-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Corporate other income (loss)	$	39		$	8,978		$	(8,939	)		(100	)
Noncontrolling interest		(335	)		(229	)		(106	)		(46	)
Income tax (expense) benefit		1,571			—			1,571			100
Net income	$	1,275		$	8,749		$	(7,474	)		(85	)

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	Nine Months Ended September 30,						Nine-Month Period Change
	2011			2010
	(in thousands)						(in thousands)			(percentage)
Corporate other income (loss)	$	26,504		$	74,379		$	(47,875	)		(64	)
Noncontrolling interest		(941	)		(781	)		(160	)		(20	)
Impairment of GoIndustry (Venture)		—			(2,914	)		2,914			100
Income tax (expense) benefit		—			1,111			(1,111	)		(100	)
Net income	$	25,563		$	71,795		$	(46,232	)		(64	)

Corporate Other Income (Loss), Net

The other income recognized during the three months ended September 30, 2011 relates to a final distribution of proceeds of a former equity method company. The other income recognized during the three months ended September 30, 2010 primarily consists of gains on the sales of Blackboard common stock.

The other income recognized during the nine months ended September 30, 2011 primarily relates to the sale of Metastorm. The other income recognized during the nine months ended September 30, 2010 primarily relates to sales of marketable securities, mostly Blackboard common stock.

Impairments

We recorded $2.9 million of impairment charges to decrease our basis in GoIndustry during the nine months ended September 30, 2010; those charges related to decreases in the fair market value of our equity holdings in GoIndustry. See Note 5, “Ownership Interests.”

Income Tax (Expense) Benefit

During the three months ended September 30, 2011, we recorded a consolidated income tax benefit of $1.3 million. During the nine months ended September 30, 2011, we recorded consolidated income tax expense of $0.6 million. A portion of the expense recorded during the nine-month period relates to deferred tax expense associated with the sale of Metastorm during the three months ended March 31, 2011, which was more than offset by the deferred tax benefit associated with the sale of ClickEquations during the three months ended June 30, 2011 and the deferred tax benefit associated with a former equity method company that was dissolved during the three months ended September 30, 2011. The aggregate effect of these items was a deferred tax benefit of $0.1 million for the nine months ended September 30, 2011. Additionally, $0.9 million relates to operations for the nine months ended September 30, 2011 and is reflected in the core segment, and $0.2 million of tax benefit relates to interest received on our income tax refund.

During the three and nine months ended September 30, 2010, ICG recorded a tax benefit of $1.1 million. That benefit was attributable to $0.7 million of interest related to a portion of the tax receivable that was paid by the IRS during the nine months ended September 30, 2010, as well as a provision to return adjustment of $0.4 million to reflect the actual net operating loss carryback related to the 2009 tax year. Additionally expense of $4.2 million relates to operations for the nine months ended September 30, 2010 and is reflected in the core segment.

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 ownership interests, 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 materially 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.

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Valuation of Goodwill, Intangible Assets and Ownership Interests

We test goodwill for impairment annually, or more frequently as conditions warrant, and test 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 companies accounted for under the equity and cost methods of accounting to determine whether an other-than-temporary decline in the value of any of these companies 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 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 those 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 setup 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 setup services are expensed as incurred.

InvestorForce generates revenue from license fees earned in connection with hosted services, setup fees and support and maintenance fees. Hosted services primarily consist of data aggregation, performance calculation, real-time analysis and automated production of performance reports for the institutional investment community. Generally, a minimum quarterly base fee is charged for hosted services. These minimum fees are recognized on a prorated basis over the service term. As the volume of client accounts increases, additional fees apply. These additional fees are recognized in the period in which account volumes exceed the contract minimum. Setup and support and maintenance fees are deferred and recognized ratably over the service term.

Equity Income/Loss

We record our share of the net income or loss reported by our core and venture companies 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 these companies and may require adjustment in the future when the audits of the 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.

Cash and Cash Equivalents

We generally consider all highly liquid instruments with an original maturity of approximately three months or less at the time of purchase to be cash equivalents.

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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 those matters, as well as potential ranges of probable losses. A determination of the amount of reserves required for those 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 Sheets based on quoted prices in active markets for identical or comparable assets.

Recent Accounting Pronouncements

In September 2011, the FASB issued accounting guidance that permits an entity to first assess qualitative factors regarding whether it is more likely than not that an impairment to the entity’s goodwill exists as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. Previous accounting guidance required an entity to test goodwill for impairment on at least an annual basis by comparing the fair value of a reporting unit with its carrying amount including goodwill before performing the second step of the test to measure the amount of the impairment loss, if any. This guidance will become effective for us on January 1, 2012. We do not expect the adoption of this guidance to have a significant impact on the Consolidated Financial Statements.

In June 2011, the FASB issued accounting guidance related to the presentation of other comprehensive income and its components in the financial statements. This guidance provides two options for presenting the total of comprehensive income, the components of net income and the components of other comprehensive income. This guidance will become effective for us on January 1, 2012 and must be applied retrospectively. We do not expect the adoption of this guidance to have a significant impact on the Consolidated Financial Statements.

In May 2011, the FASB issued accounting guidance that results in common fair value measurement and disclosure requirements in GAAP and International Financial Reporting Standards. The guidance changes the wording used to describe many of the requirements in GAAP for measuring fair value and for disclosing information about fair value measurements, and clarifies the FASB’s intent about the application of existing fair value measurement requirements. This guidance will become effective for us on January 1, 2012 and must be applied prospectively. We do not expect the adoption of this guidance to have a significant impact on the Consolidated Financial Statements.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

ICG Commerce conducts a portion of its business in several foreign currencies, and, from time to time, 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. These instruments are 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 allow ICG Commerce to minimize the risk of currency fluctuations. In determining the use of its instruments, 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 nine months ended September 30, 2011, ICG Commerce purchased average rate currency options to mitigate the risk of currency fluctuations at ICG Commerce’s operations in the United Kingdom, Europe, Asia and South America. These instruments net settle each quarter and mature at various times through December 31, 2011. The use of these instruments resulted in an immaterial loss in the three and nine months ended September 30, 2011.

ICG Commerce is party to a term loan agreement with PNC Bank in the amount of $20.0 million, the interest rate for which is computed based on certain fixed and variable indices. During the year ended December 31, 2010, ICG Commerce entered into a rate swap transaction to minimize the risk of interest rate fluctuations. This rate swap transaction net settles each month and matures on August 1, 2015. ICG Commerce recognized an immaterial gain during the three months ended September 30, 2011 and an immaterial loss during the nine months ended September 30, 2011 related to this instrument.

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We are exposed to equity price risks on the marketable portion of our equity securities. Our public holdings at September 30, 2011 include an equity position in GoIndustry, which has experienced significant historical volatility in its stock prices. A 20% adverse change in equity prices, based on a sensitivity analysis of our holdings in GoIndustry as of September 30, 2011, would result in a decrease in the fair value of our public holdings of approximately $0.4 million. Although a 20% adverse change in equity prices would cause the fair value of our holdings in GoIndustry to decrease to $1.7 million, the carrying value of our equity holdings in GoIndustry was $0.8 million as of September 30, 2011. Accordingly, a 20% adverse change in equity prices of our public holdings at September 30, 2011 would have no impact to our Consolidated Balance Sheets or Consolidated Statements of Operations.

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, if any, are carried at fair value.

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 our 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, our 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 our 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 our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required 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, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

In May and June 2001, certain of ICG’s present directors, along with ICG, 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 ICG. 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 ICG 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 ICG’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 ICG’s stock by analysts employed by the underwriters. In June and July 2002, defendants, including ICG defendants, filed motions to dismiss plaintiffs’ complaints on numerous grounds. ICG’s motion was denied in its entirety in an opinion dated February 19, 2003. In July 2003, a committee of ICG’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 ICG, the defendants moved for, and the Court granted, an order that would apply the decision to all cases, including the consolidated action against ICG. 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 ICG, 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 ICG. The motion further seeks certification of settlement classes as to each action against the defendants, including ICG. ICG has assented to the proposed settlement, which does not require any monetary contribution from ICG 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.

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, ICG 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 ICG 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 ICG. The final judgment created a settlement class of plaintiffs comprised of persons who purchased or otherwise acquired the common stock and call options of ICG 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 ICG and other defendants in the consolidated amended action with prejudice.

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The appeals referenced in the November 6, 2009 notices of appeal have been docketed in the Court of Appeals for the Second Circuit. 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 ICG. Separately, on June 17, 2010, the District Court entered an order requiring the appellants to post a bond in the amount of $25,000, jointly and severally, as a condition of pursuing their appeals from the October 5, 2009 order approving the global settlement. The bond was posted and a briefing schedule with respect to the appeals was set. The distribution of settlement proceeds is currently being held in abeyance.

Since September 2010, four of the six individuals or groups that filed appeals from the class settlement have dropped their appeals, leaving two, a pro se appeal by James Hayes and an appeal filed by Theodore Bechtold, an attorney filing on his own behalf. Each filed opening briefs challenging the settlement and/or class certification on a variety of grounds. Responsive briefs from the appellees were due to be filed by December 17, 2010. On December 8, 2010, however, the plaintiff-appellees (class counsel defending the class settlement) moved to dismiss the Bechtold appeal on a variety of technical grounds. On June 20, 2011, the Court of Appeals dismissed the Bechtold appeal and remanded the Hayes appeal to the District Court for a determination as to whether the sole remaining appellant objector has standing to pursue an appeal. By order dated August 25, 2011, the District Court held that Hayes lacked standing to pursue an appeal and, on September 23, 2011, Hayes filed a notice of appeal of that decision. No schedule has been set for further proceedings in connection with this latest appeal.

ITEM 1A. Risk Factors

In addition to the other information set forth in this Report, you should carefully consider the factors discussed in Item 1A — “Risk Factors” in our Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2010 which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K and Form 10-K/A 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 ICG’s risk factors previously disclosed in its Annual Report on Form 10-K and Form 10-K/A for the year ended December 31, 2010.

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

Issuer Purchases of Equity Securities

In 2008, we adopted a share repurchase program under which we may repurchase, from time to time, up to $25.0 million of shares of our 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 our Common Stock that occurred under the share repurchase program through the date of the filing of this Report.

Period	Total Number of Shares Purchased(1)		Average Price Paid per Share(2)		Total Number of Shares Purchased as Part of Publicly Announced Program(1)		Approximate Dollar Value That May Yet Be Purchased Under the Program
Repurchased as of 12/31/10		2,440,400	$	4.89		2,440,400	$	13.1 million
1/1/11 to 1/31/11		0		—		0	$	13.1 million
2/1/11 to 2/28/11		0		—		0	$	13.1 million
3/1/11 to 3/31/11		0		—		0	$	13.1 million
4/1/11 to 4/30/11		0		—		0	$	13.1 million
5/1/11 to 5/31/11		0		—		0	$	13.1 million
6/1/11 to 6/30/11		66,700	$	11.50		66,700	$	12.3 million
7/1/11 to 7/31/11		61,500	$	11.60		61,500	$	11.6 million
8/1/11 to 8/31/11		639,714	$	9.95		639,714	$	5.2 million
9/1/11 to 9/30/11		73,113	$	9.73		73,113	$	4.5 million
10/1/11 to 10/31/11		0		—		0	$	4.5 million
11/1/11 to 11/7/11		0		—		0	$	4.5 million
Total		3,281,427	$	6.24		3,281,427	$	4.5 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
10.1	Restricted Stock Agreement dated as of October 4, 2011 by and among ICG Group, Inc., Internet Capital Group Operations, Inc. and Walter W. Buckley (filed herewith).
10.2	Restricted Stock Agreement dated as of October 4, 2011 by and among ICG Group, Inc., Internet Capital Group Operations, Inc. and Douglas Alexander (filed herewith).
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.
101	The following financial information formatted in eXtensible Business Reporting Language (XBRL) from ICG’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, filed November 8, 2011: (i) Consolidated Balance Sheets – September 30, 2011 (unaudited) and December 31, 2010, (ii) Consolidated Statements of Operations (unaudited) – Three and Nine Months Ended September 30, 2011 and 2010, (iii) Consolidated Statements of Changes in Equity (unaudited) – Nine Months Ended September 30, 2011 and 2010, (iv) Consolidated Statements of Cash Flows (unaudited) – Nine Months Ended September 30, 2011 and 2010 and (v) Notes to Consolidated Financial Statements.*

* As provided in Rule 406T of Regulation S-T, this exhibit shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liability under those sections.

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SIGNATURES

Pursuant to the requirements of the Security Exchange Act of 1934, ICG Group, Inc. has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: November 8, 2011	ICG GROUP, INC.
	By: /s/ R. Kirk Morgan
	Name:	R. Kirk Morgan
	Title:	Chief Financial Officer
		(Principal Financial and Accounting Officer)

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