10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

EXCHANGE ACT OF 1934

For Quarterly Period Ended June 30, 2008

Commission File Number 001-16249

INTERNET CAPITAL GROUP, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

The number of shares of the Company’s Common Stock, $0.001 par value per share outstanding as of July 31, 2008 was 38,713,144 shares.

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

INDEX

PART I — FINANCIAL INFORMATION
ITEM	PAGE NO.
Item 1. Financial Statements:
Consolidated Balance Sheets—June 30, 2008 (unaudited) and December 31, 2007		6
Consolidated Statements of Operations (unaudited)—Three and Six Months Ended June 30, 2008 and 2007		7
Consolidated Statements of Cash Flows (unaudited)—Six Months Ended June 30, 2008 and 2007		8
Notes to Consolidated Financial Statements		9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 3. Quantitative and Qualitative Disclosures About Market Risk		34
Item 4. Controls and Procedures		35
PART II —OTHER INFORMATION
Item 1. Legal Proceedings		35
Item 1A. Risk Factors		36
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		36
Item 3. Defaults Upon Senior Securities		36
Item 4. Submission of Matters to a Vote of Security Holders		37
Item 5. Other Information		37
Item 6. Exhibits		38
Signatures		39

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

This Quarterly Report on Form 10-Q includes “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended the (“Exchange Act”). See the subsection of Part II, Item 2 entitled “Introduction; Forward - Looking Statements” for more information.

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

2

INTERNET CAPITAL GROUP, INC.
PARTNER COMPANIES AS OF JUNE 30, 2008

At June 30, 2008, our consolidated core partner companies consisted of:

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

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

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

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

Vcommerce Corporation (“Vcommerce”)

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

At June 30, 2008, our core partner companies accounted for under the equity method consisted of:

Channel Intelligence, Inc. (“Channel Intelligence”)

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

Freeborders, Inc. (“Freeborders”)

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

3

Metastorm Inc. (“Metastorm”)

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

StarCite, Inc. (“StarCite”)

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

WhiteFence, Inc. (“WhiteFence”)

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

At June 30, 2008, our other holdings partner companies primarily consisted of:

Anthem Ventures Fund, L.P. (“Anthem”)

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

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

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

Captive Capital Corporation (“Captive Capital”)

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

Commerce360, Inc. (“Commerce360”)

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

4

Creditex Group Inc. (“Creditex”)

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

Emptoris, Inc. (“Emptoris”)

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

Entegrity Solutions Corporation (“Entegrity Solutions”)

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

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

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

Jamcracker, Inc. (“Jamcracker”)

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

Tibersoft Corporation (“Tibersoft”)

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

5

PART I — FINANCIAL INFORMATION

ITEM 1. Financial Statements

INTERNET CAPITAL GROUP, INC.

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2008			2007
	(Unaudited)
	(in thousands,
	except per share data)
Assets
Current Assets
Cash and cash equivalents	$	42,875		$	82,031
Restricted cash		212			5
Accounts receivable, net of allowance ($422-2008; $44-2007)		9,836			7,769
Prepaid expenses and other current assets		7,126			6,883
Total current assets		60,049			96,688
Marketable securities		83,611			88,029
Fixed assets, net		2,193			1,723
Ownership interests in Partner Companies		133,230			127,888
Goodwill		34,935			17,084
Other, net		1,393			1,019
Total Assets	$	315,411		$	332,431
Liabilities and Stockholders’ Equity
Current Liabilities
Current maturities of other long-term debt	$	2,531		$	613
Accounts payable		2,186			1,624
Accrued expenses		3,484			2,871
Accrued compensation and benefits		7,763			9,554
Deferred revenue		4,594			3,277
Total current liabilities		20,558			17,939
Other long-term debt		383			191
Hedges of marketable securities		1,424			3,653
Deferred revenue		1,900			91
Other		1,161			756
Minority interest		6,178			5,143
		31,604			27,773
Stockholders’ Equity
Preferred stock, $0.01 par value; 10,000 shares authorized, none issued or outstanding		—			—
Common stock, $0.001 par value; 2,000,000 shares authorized, 38,707 (2008) and 38,651 (2007) issued and outstanding		39			39
Additional paid-in capital		3,569,918			3,567,495
Accumulated deficit		(3,366,571	)		(3,347,723	)
Accumulated other comprehensive income		80,421			84,847
Total Stockholders’ Equity		283,807			304,658
Total Liabilities and Stockholders’ Equity	$	315,411		$	332,431

See accompanying notes to Consolidated Financial Statements.

6

INTERNET CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(in thousands, except per share data)
Revenues	$	17,581		$	12,520		$	33,603		$	24,302
Operating expenses
Cost of revenue		11,575			10,381			22,946			19,406
Selling, general and administrative		9,830			7,756			18,492			16,871
Research and development		2,771			1,562			4,236			3,130
Impairment related and other		117			54			192			106
Total operating expenses		24,293			19,753			45,866			39,513
		(6,712	)		(7,233	)		(12,263	)		(15,211	)
Other income (loss), net		(359	)		3,678			5,488			(8,191	)
Interest income		404			1,148			1,233			2,626
Interest expense		(64	)		(22	)		(77	)		(268	)
Income (loss) before income taxes, minority interest and equity loss		(6,731	)		(2,429	)		(5,619	)		(21,044	)
Income tax (expense) benefit		(239	)		494			(293	)		2,642
Minority interest		(584	)		(19	)		(1,114	)		369
Equity loss		(4,741	)		(1,806	)		(11,822	)		(5,322	)
Income (loss) from continuing operations		(12,295	)		(3,760	)		(18,848	)		(23,355	)
Income (loss) on discontinued operations		—			(220	)		—			(220	)
Net income (loss)	$	(12,295	)	$	(3,980	)	$	(18,848	)	$	(23,575	)
Basic income (loss) per share:
Income (loss) from continuing operations	$	(0.32	)	$	(0.10	)	$	(0.49	)	$	(0.62	)
Income (loss) on discontinued operations		—			(0.01	)		—			(0.01	)
	$	(0.32	)	$	(0.11	)	$	(0.49	)	$	(0.63	)
Shares used in computation of basic income (loss) per share		38,383			37,846			38,302			37,825
Diluted income (loss) per share:
Income (loss) from continuing operations	$	(0.32	)	$	(0.10	)	$	(0.49	)	$	(0.62	)
Income (loss) on discontinued operations		—			(0.01	)		—			(0.01	)
	$	(0.32	)	$	(0.11	)	$	(0.49	)	$	(0.63	)
Shares used in computation of diluted income (loss) per share		38,383			37,846			38,302			37,825

See accompanying notes to Consolidated Financial Statements.

7

INTERNET CAPITAL GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	Six Months Ended June 30,
	2008			2007
	(in thousands)
Operating Activities
Net loss	$	(18,848	)	$	(23,575	)
Adjustments to reconcile net loss to provided by cash (used in) operating activities:
(Income) loss on discontinued operations		—			220
Depreciation and amortization		744			742
Impairment related and other		61			40
Equity-based compensation		3,765			4,030
Equity loss		11,822			5,322
Other (income) loss		(5,488	)		8,191
Minority interest		1,114			(369	)
Changes in assets and liabilities, net of effect of acquisitions:
Accounts receivable, net		(1,025	)		(1,029	)
Prepaid expenses and other assets		576			(2,085	)
Accounts payable		243			694
Accrued expenses		(292	)		(1,985	)
Accrued compensation and benefits		(2,641	)		(4,077	)
Deferred revenue		(288	)		(700	)
Other liabilities		28			7
Cash flows provided by (used in) operating activities		(10,229	)		(14,574	)
Cash flows from operating activities of discontinued operations
Investing Activities
Capital expenditures, net		(719	)		(853	)
Restricted cash		(7	)		(17	)
Proceeds from sales of marketable securities		—			24
Proceeds from sales of Partner Company ownership interests		3,205			32,446
Acquisitions of ownership interests in Partner Companies		(33,388	)		(5,625	)
Increase in cash due to consolidation of Partner Company		2,553			—
Cash flows provided by (used in) investing activities		(28,356	)		25,975
Financing Activities
Repurchase of senior convertible notes		—			(37,087	)
Long-term debt and capital lease obligations, net		(573	)		(480	)
Cash flows provided by (used in) financing activities		(573	)		(37,567	)
Net increase (decrease) in Cash and Cash Equivalents		(39,158	)		(26,166	)
Effect of exchange rates on cash		2			(76	)
Cash and Cash Equivalents at beginning of period		82,031			120,808
Cash and Cash Equivalents at the end of period	$	42,875		$	94,566

See accompanying notes to Consolidated Financial Statements.

8

INTERNET CAPITAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company

Description of the Company

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

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

2. Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements are unaudited and, in the opinion of management, include all adjustments consisting only of normal and recurring adjustments necessary for a fair presentation of the results for these interim periods. These Consolidated Financial Statements should be read in connection with the Consolidated Financial Statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2007. Results of operations for the three and six month period ended June 30, 2008 are not necessarily indicative of the results of operations expected for the full year.

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

Three and Six Months Ended June 30,
2008	2007
ICG Commerce	ICG Commerce
Investor Force	Investor Force
Vcommerce (1)

The Consolidated Balance Sheets include the following majority-owned subsidiaries at:

June 30, 2008	December 31, 2007
ICG Commerce	ICG Commerce
Investor Force	Investor Force
Vcommerce

⁽¹⁾ On May 1, 2008, Vcommerce became a consolidated Partner Company as the Company’s ownership interest increased to 53%. Vcommerce’s results of operations are included in the Consolidated Statements of Operations beginning May 1, 2008. See Note 4.

Principles of Accounting for Ownership Interests in Partner Companies

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

9

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

2. Significant Accounting Policies — (Continued)

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

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

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

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

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

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

10

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

2. Significant Accounting Policies — (Continued)

Use of Estimates

The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Those estimates include evaluation of the Company’s holdings in its Partner Companies, holdings in marketable securities and associated hedges, asset impairment, revenue recognition, income taxes and commitments and contingencies. Certain amounts recorded to reflect the Company’s share of losses of Partner Companies accounted for under the equity method are based on unaudited results of operations of those Partner Companies and may require adjustments in the future when audits of these entities are made final. During the three and six months ended June 30, 2008, those amounts were not material. It is reasonably possible that the Company’s accounting estimates with respect to the ultimate recoverability of ownership interests in Partner Companies and goodwill could change in the near term and that the effect of such changes on the financial statements could be material. At June 30, 2008, the Company believes the recorded amount of ownership interests in Partner Companies and goodwill is not impaired.

Concentration of Customer Base and Credit Risk

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

% of Consolidated Revenues for the:	Customer #1			Customer #2			Customer #3
Three months ended June 30, 2008		18	%		18	%		(a	)
Three months ended June 30, 2007		26	%		N/A			16	%
Six months ended June 30, 2008		19	%		18	%		(a	)
Six months ended June 30, 2007		26	%		N/A			15	%
Related accounts receivable balances at (in millions):
June 30, 2008 (b)	$	1.2		$	1.3			(c	)
December 31, 2007	$	1.4			(c	)		(c	)

(a)	Customer revenues did not exceed 10% of the Company’s consolidated revenues for the period indicated.
(b)	These accounts receivable balances for customer #1 and customer #2 include $0.7 million and $0.7 million, respectively, of unbilled accounts receivable.
(c)	Related accounts receivable were not significant at date indicated.

11

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

2. Significant Accounting Policies — (Continued)

Stock-Based Compensation

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

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

Recent Accounting Pronouncements

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

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

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

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

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

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

	Balance at
	June 30,
	2008			Level 1		Level 2			Level 3
Cash equivalents (Money market accounts)	$	38.5		$	38.5	$	—		$	—
Marketable securities (see Note 5)		83.6			83.6		—			—
Hedges of marketable securities (see Note 5)		(1.4	)		—		(1.4	)(a)		—
	$	120.7		$	122.1	$	(1.4	)	$	—

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

12

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

2. Significant Accounting Policies — (Continued)

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

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

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

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

13

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

3. Equity-Based Compensation

The following table provides additional information related to the Company’s equity-based compensation ($ in millions):

									Unrecognized		Weighted Average Years
									Equity-		Remaining of Equity-
	Three Months Ended				Six Months Ended				Based		Based Compensation
	June 30,				June 30,				Compensation at		Expense at
	2008		2007		2008		2007		June 30, 2008		June 30, 2008
Stock Appreciation Rights	$	0.9	$	0.9	$	1.9	$	1.9	$	4.7		1.2
Stock Options		—		0.1		0.1		0.2		0.1		0.5
Restricted Stock		0.5		0.6		1.0		1.2		0.6		0.4
Deferred Stock Units		0.1		0.1		0.2		0.1		0.2		0.7
Equity-Based Compensation	$	1.5	$	1.7	$	3.2	$	3.4	$	5.6
Equity-Based Compensation for Consolidated Partner Companies		0.2		0.2		0.4		0.4		1.9		2.8
Equity-Based Compensation	$	1.7	$	1.9	$	3.6	$	3.8	$	7.1

These amounts are primarily included in “Selling, general and administrative” on the Company’s Consolidated Statements of Operations for their respective periods.

Deferred Stock Units (“DSUs”)

During the six months ended June 30, 2008, the Company issued 36,000 DSUs to the Company’s non-management directors under the Non-Management Director Compensation Plan that will vest in the first quarter of 2009. These DSUs were valued at $0.3 million.

During the three and six months ended June 30, 2008, the Company issued 4,773 DSUs and 17,120 DSUs, respectively, payable in lieu of cash, which vested immediately, to the Company’s non-management directors for services provided to the Company’s Board and its committees. The expense of $0.1 million and $0.2 million for the three and six months ended June 30,  2008, respectively, and expense of $0.1 million and $0.2 million for the three and six months ended June 30, 2007, associated with the quarterly grants for service is included in “Selling, General and Administrative” on the Company’s Consolidated Statements of Operations, but is not included in the summarized Equity-Based compensation table above.

4. Ownership interests in Partner Companies and Goodwill

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

	June 30,		December 31,
	2008		2007
	(in thousands)
Ownership interests in Partner Companies — Equity Method	$	103,633	$	98,144
Ownership interests in Partner Companies — Cost Method		29,597		29,744
	$	133,230	$	127,888

14

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

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

Beginning with the three months ended March 31, 2008, Commerce360, which was previously accounted for under the cost method, became an equity method company due to an increase in the Company’s ownership stake in Commerce360 following its participation in a financing round during that period. Prior periods have not been restated to reflect prior equity losses from the original acquisition in Commerce360, because such losses were immaterial to the Company.

Acquisitions — Consolidated Companies

Effective May 1, 2008, in connection with the Company’s purchase of stock in Vcommerce in December 2006, the Company received additional shares of Vcommerce stock for no additional consideration. Following the Company’s receipt of these additional shares, the Company is accounting for Vcommerce, which was previously accounted for under the equity method, under the consolidation method. As of April 30, 2008, the carrying value of Vcommerce was $15.2 million. The Company has made preliminary purchase price allocations with respect to its interest in Vcommerce and is in the process of finalizing such allocations. The carrying value of Vcommerce has preliminarily been allocated as follows: $17.9 million of goodwill; $0.9 million of intangibles; and $3.6 million of net liabilities.

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

Goodwill at December 31, 2007	$	17,084
Increase due to Vcommerce consolidation		17,948
Reduction due to dilution of a consolidated partner company’s ownership		(97	)
Goodwill at June 30, 2008	$	34,935

As of June 30, 2008 and December 31, 2007, all of the Company’s goodwill was allocated to the core segment.

Equity Method Companies

The following unaudited summarized financial information relates to the Company’s Partner Companies accounted for under the equity method of accounting at June 30, 2008 and December 31, 2007. This aggregate information has been compiled from the financial statements and capitalization tables of the respective equity method Partner Companies.

	Approximate Voting Ownership:
Equity Method Partner Company	June 30, 2008			December 31, 2007
Channel Intelligence		46	%		41	%
Commerce360		30	%		8	%
Freeborders		32	%		32	%
GoIndustry		29	%		31	%
Metastorm		32	%		32	%
StarCite		34	%		26	%
Vcommerce			(1)		48	%
WhiteFence		35	%		35	%

⁽¹⁾ Vcommerce was consolidated effective May 1, 2008 as the Company’s ownership interest increased to 53%. Vcommerce is included in the equity method results of operations through April 30, 2008 at an ownership level of 48%.

15

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

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

Balance Sheets (Unaudited)

	June 30, 2008 (1)		December 31, 2007(2)
	(in thousands)
Cash, cash equivalents and short-term investments	$	52,998	$	41,313
Other current assets		92,619		85,074
Other non-current assets		185,892		171,526
Total assets	$	331,509	$	297,913
Current liabilities	$	99,009	$	105,184
Non-current liabilities		14,873		11,546
Long-term debt		11,311		16,011
Stockholders’ equity		206,316		165,172
Total liabilities and stockholders’ equity	$	331,509	$	297,913
Total carrying value	$	103,633	$	98,144

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

At June 30, 2008, the Company’s carrying value in equity method Partner Companies in the aggregate exceeded the Company’s share of net assets of these equity method Partner Companies by approximately $39.3 million. This excess is allocated $31.0 million to goodwill, which is not amortized, and $8.3 million to intangibles, which are generally amortized over a range of 3 to 7 years. Amortization expense associated with these intangibles of $0.4 million and $0.6 million for the three and six months ended June 30, 2008, is included in the table below in the line item “Total equity income (loss),” and is included in “Equity Loss” on the Company’s Consolidated Statements of Operations.

Results of Operations (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2008 (1)			2007 (2)			2008 (3)			2007 (4)
	(in thousands)						(in thousands)
Revenues	$	61,944		$	51,242		$	118,756		$	99,418
Net income (loss)	$	(13,229	)	$	(5,936	)	$	(29,111	)	$	(13,575	)
Total equity income (loss)	$	(4,741	)	$	(1,806	)	$	(11,822	)	$	(5,322	)

(1)	Includes Channel Intelligence, Commerce360, Freeborders, GoIndustry, Metastorm, StarCite, Vcommerce (to date of consolidation) and WhiteFence.
(2)	Includes Channel Intelligence, Freeborders, GoIndustry, Marketron International, Inc. (“Marketron”) (to date of disposition), Metastorm, StarCite, Vcommerce and WhiteFence.
(3)	Includes Channel Intelligence, Commerce360, Freeborders, GoIndustry, Metastorm, StarCite, Vcommerce (to date of consolidation) and WhiteFence.
(4)	Includes Channel Intelligence, Freeborders, GoIndustry, Marketron (to date of disposition), Metastorm, StarCite, Vcommerce and WhiteFence.

Other Equity Company Information

In February 2008, GoIndustry issued equity in conjunction with a financing and an acquisition transaction. In conjunction with the financing, the Company purchased an additional 52,690,950 shares of GoIndustry for approximately $10.5 million. As a result of these transactions, the Company’s ownership in

16

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

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

GoIndustry was reduced from 31% to approximately 29%. The reduction in the Company’s ownership interest in GoIndustry was accounted for as a disposition of shares and resulted in a dilution loss for accounting purposes. The dilution loss totaled $1.3 million and was recorded as an equity transaction with a decrease to additional paid-in capital. At June 30, 2008, the Company owns 133,832,852 shares of GoIndustry, or approximately 29% of the outstanding shares.

In the three and six months ended June 30, 2008, the Company increased its ownership percentage in Channel Intelligence, Commerce360 and StarCite through the Company’s acquisition of existing shares and participation in financing rounds. The total amount of these acquisitions was $22.9 million. The Company has made a preliminary allocation of the purchase prices and is in the process of finalizing its purchase price allocations for these transactions.

As of June 30, 2008, the Company has outstanding aggregate contingent gains of approximately $4.0 million associated with escrows related to sales of prior equity method Partner Companies. These escrows primarily relate to sale consideration that was set aside to satisfy potential purchase price adjustments and/or potential indemnity claims. The Company records escrow proceeds at the time the Company is entitled to such proceeds, the amount is fixed or determinable and realization is assured.

Cost Company Information

On June 3, 2008, Creditex entered into a merger agreement pursuant to which it will be acquired by IntercontinentalExchange, Inc. (NYSE: ICE) (“ICE”). The closing of the merger, which is subject to certain closing conditions, is expected to occur late in the third quarter of 2008. The Company’s estimated share of the stated merger consideration, which is based on an estimate of the working capital adjustment and other adjustments contained in the merger agreement, is approximately $85.0 million. The merger consideration to be paid to the Company will be paid in shares of ICE common stock based on the average of two 8-day average prices of ICE common stock, one of which corresponds with the signing of the merger agreement, and the other of which corresponds with the closing of the merger. The number of shares of ICE stock to be received by the Company as merger consideration will not be determined until the closing, and 7.5% of such shares will be held in escrow to satisfy potential indemnification claims. Based on the estimates described above, if the merger had closed on July 30, 2008, the Company would have received approximately 735,000 shares of ICE stock (inclusive of the escrowed shares) valued at approximately $76.4 million. The actual value of the shares of ICE stock to be received by the Company in the merger is subject to fluctuation based on changes in the value of ICE’s stock until the fifth business day prior to the closing of the transaction. The Company’s carrying value of Creditex at June 30, 2008 is $24.8 million.

5. Marketable Securities and Related Derivatives

Marketable securities represent the Company’s holdings in common stock of publicly traded companies accounted for under the cost method of accounting. The cost, unrealized holding gains/(losses), and fair value of marketable securities at June 30, 2008 and December 31, 2007 were as follows:

					Unrealized
	Common Shares				Holding
	Owned		Cost		Gains/(Losses)		Fair Value
			(in thousands, except shares)
June 30, 2008
Blackboard		2,187,060	$	3,162	$	80,449	$	83,611
December 31, 2007
Blackboard		2,187,060	$	3,162	$	84,867	$	88,029

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

17

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

5. Marketable Securities and Related Derivatives — (Continued)

The Company manages the Company’s exposure to and benefits from price fluctuations of Blackboard common stock by selectively using derivative securities or hedges. Although these instruments are derivative securities, their economic risks are similar to, and managed on the same basis as, risks of the other equity instruments the Company holds. These instruments are marked to market through earnings. As of June 30, 2008, the Company has entered into cashless collar contracts with various expiration dates between March 15, 2010 and October 15, 2010 to hedge 1,625,000 shares of its total holdings of 2,187,060 shares of Blackboard common stock at weighted average minimum and maximum prices per share of $24.27 and $56.35, respectively.

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008		2007
				(in thousands)
Unrealized gain (loss) on mark to market of hedges	$	(3,452	)	$	(6,007	)	$	2,228	$	(7,119	)

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

	Quarter Ended
	Dec. 31,		March 31,		June 30,		Dec 31,		March 31,		June 30,
	2006		2007		2007		2007		2008		2008
Blackboard closing stock price	$	30.04	$	33.63	$	42.12	$	40.25	$	33.33	$	38.23

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

The fair value of these instruments was a liability of $1.4 million and $3.7 million at June 30, 2008 and December 31, 2007, respectively, which is included in “Hedges of Marketable Securities” in the liabilities section of the Company’s Consolidated Balance Sheets.

18

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

6. Debt

Senior Convertible Notes

In February 2007, the Company repurchased and extinguished the remaining $26.6 million of its April 2009 senior convertible notes for $37.1 million plus accrued interest. The Company recorded a loss of $10.8 million on these repurchases, including $0.3 million for the acceleration of deferred financing fees during the six months ended June 30, 2007. These losses are included in “Other income (loss), net” for their appropriate period within the Company’s Consolidated Statements of Operations.

The Company recorded interest expense of $0.2 million for the six months ended June 30, 2007 related to these notes. The Company expensed $0.1 million related to the amortization of deferred financing fees in the six months ended June 30, 2007, excluding any expense relating to accelerations of deferred financing fees as a result of the repurchases described above.

Other Long-Term Debt

The Company’s other long-term debt at June 30, 2008 of $2.9 million relates to its consolidated Partner Companies, ICG Commerce, Investor Force, and Vcommerce and primarily consists of a note at Vcommerce. The long-term debt is due as follows: $2.5 million is due in 2008 and the remaining $0.4 million is due in 2009.

Loan and Credit Agreements

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

On May 8, 2008, the Company entered into a series of loan agreements with Credit Suisse Capital LLC. Pursuant to these agreements, the Company may, from time to time, borrow funds secured by the cashless collar contracts that the Company previously entered into with respect to 1,625,000 of its shares of Blackboard common stock. The loans bear interest, which is payable quarterly in arrears, at the three-month U.S. dollar LIBOR rate, computed on the basis of a 30-day month and a 360-day year. This interest rate resets on the first day of each calendar quarter. The maturity of each of the loans corresponds with the expiration of the underlying cashless collar contract. Accordingly, the maturity dates of the loans range from March 15, 2010 to October 15, 2010. The maximum borrowing capacity under each of the loan agreements equals the present value of the minimum value of the underlying cashless collar contract, computed using the three month U. S. dollar LIBOR rate. As of June 30, 2008, the aggregate maximum borrowing capacity under the loan agreements is approximately $37 million. The Company has not drawn any amounts under the loan agreements to date.

19

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

7. Segment Information

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

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

Approximately 15% and 13% of the Company’s consolidated revenues for the three month and six months ended June 30, 2008, respectively, relates to sales generated in the United Kingdom. The revenues outside the United States in 2007 were not significant. As of June 30, 2008 and December 31, 2007, the Company’s assets were located primarily in the United States.

(in thousands)
										Reconciling Items
										Discontinued
										Operations
							Total			and								Consolidated
	Core			Other Holdings			Segment			Dispositions*		Corporate			Other**			Results
Three Months Ended June 30, 2008
Revenues	$	17,581		$	—		$	17,581		$	—	$	—		$	—		$	17,581
Net income (loss)	$	(6,102	)	$	168		$	(5,934	)	$	—	$	(5,370	)	$	(991	)	$	(12,295	)
Three Months Ended June 30, 2007
Revenues	$	12,520		$	—		$	12,520		$	—	$	—		$	—		$	12,520
Net income (loss)	$	(4,136	)	$	223		$	(3,913	)	$	141	$	(4,269	)	$	4,061		$	(3,980	)
Six Months Ended June 30, 2008
Revenues	$	33,603		$	—		$	33,603		$	—	$	—		$	—		$	33,603
Net income (loss)	$	(12,202	)	$	(934	)	$	(13,136	)	$	—	$	(10,044	)	$	4,332		$	(18,848	)
Six Months Ended June 30, 2007
Revenues	$	24,302		$	—		$	24,302		$	—	$	—		$	—		$	24,302
Net income (loss)	$	(9,210	)	$	(545	)	$	(9,755	)	$	634	$	(9,188	)	$	(5,266	)	$	(23,575	)

* Discontinued Operations represent net loss of $220 for the three and six months ended June 30, 2007. All other amounts relate to dispositions.

	Three Months Ended June 30,						Six Months Ended June 30,
**		2008			2007			2008			2007
Corporate other income (loss) (Note 9)	$	(407	)	$	3,586		$	5,446		$	(8,277	)
Corporate income tax (expense) benefit		—			494			—			2,642
Minority interest		(584	)		(19	)		(1,114	)		369
	$	(991	)	$	4,061		$	4,332		$	(5,266	)

20

7. Segment Information — (Continued)

							Discontinued
							Operations
					Total		and						Consolidated
	Core		Other Holdings		Segment		Dispositions		Corporate		Other		Results
Assets as of:
June 30, 2008	$	145,941	$	51,341	$	197,282	$	—	$	118,129	$	—	$	315,411
Assets as of:
December 31, 2007	$	128,518	$	39,829	$	168,347	$	—	$	164,084	$	—	$	332,431

8. Parent Company Financial Information

Parent company financial information is provided to present the financial position and results of operations of the Company and its wholly-owned subsidiaries as if the Partner Companies accounted for under the consolidation method of accounting were accounted for under the equity method of accounting for all applicable periods presented. The Company’s share of the consolidated Partner Companies’ losses is included in “Equity loss” in the Parent Company Statements of Operations for all periods presented based on the Company’s ownership percentage in each period. The carrying value of the consolidated companies as of June 30, 2008 and December 31, 2007 is included in “Ownership interests in Partner Companies” in the Parent Company Balance Sheets.

Parent Company Balance Sheets

	As of June 30, 2008		As of December 31, 2007
	(in thousands)
Assets
Cash and cash equivalents	$	28,820	$	69,125
Other current assets		5,509		6,286
Current assets		34,329		75,411
Ownership interests in Partner Companies		171,188		149,407
Marketable securities		83,611		88,029
Other		214		644
Total assets	$	289,342	$	313,491
Liabilities and stockholders’ equity
Current liabilities	$	3,155	$	4,666
Hedges of marketable securities		1,424		3,653
Non-current liabilities		928		495
Stockholders’ equity		283,835		304,677
Total liabilities and stockholders’ equity	$	289,342	$	313,491

Parent Company Statements of Operations

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
				(unaudited)
				(in thousands)
Revenues	$	—		$	—		$	—		$	—
Operating expenses
General and administrative		5,717			5,305			11,149			11,338
Total operating expenses		5,717			5,305			11,149			11,338
		(5,717	)		(5,305	)		(11,149	)		(11,338	)
Other income (loss), net*		(407	)		3,586			5,446			(8,277	)
Interest income (expense), net		347			1,036			1,105			2,150
Income (loss) before income taxes and equity loss		(5,777	)		(683	)		(4,598	)		(17,465	)
Income tax benefit (expense)		—			494			—			2,642
Equity loss		(6,518	)		(3,791	)		(14,250	)		(8,752	)
Net income (loss)	$	(12,295	)	$	(3,980	)	$	(18,848	)	$	(23,575	)

* For purposes of Parent Company reporting, discontinued operations are included in the “Other income (loss), net” line item.

21

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

8. Parent Company Financial Information — (Continued)

Parent Company Statements of Cash Flows

	Six Months Ended June 30,
	2008			2007
	(in thousands)
Operating Activities
Net income (loss)	$	(18,848	)	$	(23,575	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		69			69
Equity-based compensation		3,396			3,726
Equity loss		14,250			8,752
Other (income) loss		(5,446	)		8,277
Changes in assets and liabilities, net of effect of acquisitions:
Prepaid expenses and other assets		1,173			(1,953	)
Accounts payable		51			(21	)
Accrued expenses		(514	)		(1,032	)
Accrued compensation and benefits		(1,043	)		(1,406	)
Other liabilities		—			(3	)
Cash provided by (used in) operating activities		(6,912	)		(7,166	)
Investing Activities
Capital expenditures, net		(10	)		(36	)
Proceeds from sales of marketable securities		—			24
Proceeds from sales of ownership interests in Partner Companies		3,205			32,446
Acquisitions of ownership interests in Partner Companies, net		(36,588	)		(7,075	)
Cash provided by (used in) investing activities		(33,393	)		25,359
Financing Activities
Repurchase of senior convertible notes		—			(37,087	)
Cash provided by (used in) financing activities		—			(37,087	)
Net increase (decrease) in cash and cash equivalents		(40,305	)		(18,894	)
Cash and cash equivalents at beginning of period		69,125			104,249
Cash and cash equivalents at end of period	$	28,820		$	85,355

9. Other Income (Loss)

Other Income (Loss), net

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008		2007
				(in thousands)
Loss on repurchase of convertible notes (Note 6)	$	—		$	—		$	—	$	(10,833	)
Unrealized gain (loss) on mark-to-market of hedges		(3,452	)		(6,007	)		2,228		(7,119	)
Gains on sales/distributions of ownership interests in Partner Companies		3,031			8,638			3,205		8,658
Realized gains (losses) on marketable securities		—			—			—		22
Other		14			955			13		995
	$	(407	)	$	3,586		$	5,446	$	(8,277	)
Total other income (loss) for Consolidated Partner Companies		48			92			42		86
	$	(359	)	$	3,678		$	5,488	$	(8,191	)

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

10. Income Taxes

The tax expense for the three and six months ended June 30, 2008 of $0.2 million and $0.3 million, respectively, related to ICG Commerce.

The Company recorded a tax benefit of $0.5 million and $2.6 million, respectively, for the three and six months ended June 30, 2007 related to the operating loss for that period. This benefit can be realized through a carryback to 2005. No benefit was recorded for the operating loss for the three-month period ended June 30, 2008 as realization of this benefit is not considered to be more likely than not.

Excluding the loss for the three and six months ended June 30, 2008, the Company had federal net operating loss carry-forwards of approximately $506.2 million that may be used to offset future taxable income. The Company also had capital loss carry-forwards of approximately $467.0 million that may be used to offset future capital gains. The net operating loss and capital loss carry-forwards, as well as certain other deferred tax assets, are subject to significant limitations on their utilization. The annual limitation on the utilization of these carry-forwards is approximately $14.5 million. These net operating loss carry-forwards expire between 2014 and 2027, and the capital loss carry-forwards expire between 2008 and 2012. Additional limitations on the utilization of these carry-forwards may be imposed if the Company experiences another change in ownership.

The Company’s net deferred tax asset of $482.6 million at June 30, 2008 consists of deferred tax assets of $512.6 million, relating primarily to Partner Company basis differences, capital and net operating loss carry-forwards, offset by deferred tax liabilities of $30.0 million, primarily related to unrealized appreciation in available-for-sale securities. The Company has recorded a full valuation allowance against its net deferred tax assets.

11. Net Income (Loss) per Share

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(in thousands, except per share data)
Basic and Diluted:
Income (loss) from continuing operations	$	(12,295	)	$	(3,760	)	$	(18,848	)	$	(23,355	)
Income (loss) on discontinued operations		—			(220	)		—			(220	)
Net income (loss)	$	(12,295	)	$	(3,980	)	$	(18,848	)	$	(23,575	)
Basic and Diluted:
Income (loss) from continuing operations per share	$	(0.32	)	$	(0.10	)	$	(0.49	)	$	(0.62	)
Income (loss) on discontinued operations per share		—			(0.01	)		—			(0.01	)
Net income (loss) per share	$	(0.32	)	$	(0.11	)	$	(0.49	)	$	(0.63	)
Basic and diluted weighted average common shares outstanding		38,383			37,846			38,302			37,825

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

11. Net Income (Loss) per Share — (Continued)

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

			Weighted Average
	Shares		Price Per Share
Three Months Ended June 30, 2008
SARs		3,549,688	$	7.58
Stock options		637,204	$	37.13
Restricted stock		283,782	$	—
Deferred stock units		36,000	$	—
Warrants		12,500	$	6.00
Six Months Ended June 30, 2008
SARs		3,549,688	$	7.58
Stock options		637,204	$	37.13
Restricted stock		283,782	$	—
Deferred stock units		36,000	$	—
Warrants		12,500	$	6.00
Three Months Ended June 30, 2007
SARs		3,541,115	$	7.48
Stock options		637,454	$	37.12
Restricted stock		738,921	$	—
Deferred stock units		31,500	$	—
Warrants		12,500	$	6.00
Six Months Ended June 30, 2007
SARs		3,541,115	$	7.48
Stock options		637,454	$	37.12
Restricted stock		738,921	$	—
Deferred stock united		31,500	$	—
Warrants		12,500	$	6.00

12 . Comprehensive Income (Loss)

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
				(unaudited)
				(in thousands)
Net loss	$	(12,295	)	$	(3,980	)	$	(18,848	)	$	(23,575	)
Other comprehensive income (loss):
Unrealized holding gains in marketable securities		10,717			18,567			(4,417	)		26,420
Reclassification adjustments/realized net gains on marketable securities		—			—			—			(377	)
Other accumulated other comprehensive income (loss)		(9	)		—			(9	)		—
Comprehensive income (loss)	$	(1,587	)	$	14,587		$	(23,274	)	$	2,468

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

Introduction; Forward-Looking Statements

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

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

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

Factors that could cause our actual results, levels of activity, performance or achievements to differ materially from those anticipated in forward-looking statements include, but are not limited to, factors discussed elsewhere in this Report and include, among other things:

• capital spending by enterprises and customers;

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

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

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

• our ability to maximize value in connection with divestitures;

• our ability to retain key personnel; and

• our ability to effectively manage existing capital resources.

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.

Executive Summary

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

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

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

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

Liquidity and Capital Resources

The following table summarizes our and our consolidated subsidiaries’ cash and cash equivalents, restricted cash, and marketable securities as of June 30, 2008 and December 31, 2007:

	June 30, 2008						December 31, 2007
			Consolidated						Consolidated
	Corporate		Subsidiaries		Total		Corporate		Subsidiaries		Total
	(in thousands)
Cash and cash equivalents	$	28,820	$	14,055	$	42,875	$	69,125	$	12,906	$	82,031
Restricted cash (1)		—		212		212		—		5		5
	$	28,820	$	14,267	$	43,087	$	69,125	$	12,911	$	82,036
Marketable securities (2)	$	82,187	$	—	$	82,187	$	84,376	$	—	$	84,376

(1)	Restricted cash at December 31, 2007 does not include $156 of long-term restricted cash included in “Other” assets on the Company’s Consolidated balance sheets.
(2)	Includes an offsetting liability of $1,424 and $3,653 at June 30, 2008 and December 31, 2007, respectively, related to derivative instruments associated with the Company’s marketable securities.

We believe existing cash and cash equivalents, our borrowing facilities and proceeds from the potential sales of all or a portion of our interests in certain marketable securities and partner companies to be sufficient to fund our cash requirements for the foreseeable future, including any future commitments to partner companies, debt obligations, share repurchases and general operations requirements. At June 30, 2008, as well as the date of this filing, we were not obligated for any significant funding and guarantee commitments to existing partner companies. We will continue to evaluate acquisition opportunities and may acquire additional ownership interests in new and existing partner companies in the next twelve months; however, such acquisitions will generally be made at our discretion.

In July 2008, our Board of Directors authorized a share repurchase program pursuant to which we may repurchase shares of our common stock in an aggregate amount not to exceed $20 million.

Consolidated working capital decreased by $39.3 million from December 31, 2007 to June 30, 2008, primarily due to fundings to partner companies.

Summary of Statements of Cash Flows

	Six Months Ended June 30,
	2008			2007
	(in thousands)
Cash provided by (used in) operating activities	$	(10,229	)	$	(14,574	)
Cash provided by (used in) investing activities	$	(28,356	)	$	25,975
Cash provided by (used in) financing activities	$	(573	)	$	(37,567	)

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

The increase in cash used in investing activities from 2007 to 2008 is the result of a greater aggregate amount of partner company fundings in 2008 versus 2007. In addition, there was a significant partner company sale in 2007.

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

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

Contractual Cash Obligations and Commercial Commitments

We had no other material changes to contractual cash obligations and commercial commitments for the three and six months ended June 30, 2008.

Off-Balance Sheet Arrangements

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

Our Partner Companies

As of June 30, 2008, we owned interests in 18 partner companies that are categorized below based on segment and method of accounting.

CORE PARTNER COMPANIES (%Voting Interest)
Consolidated	Equity	Cost
ICG Commerce (65%)	Channel Intelligence (46%)	(none)
Investor Force (80%)	Freeborders (32%)
Vcommerce (53%)	Metastorm (32%)
	StarCite (34%)
	WhiteFence (35%)

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

(1)	As of June 30, 2008, we own 2,187,060 shares of Blackboard (NASDAQ:BBBB) See “Note 5 — Marketable Securities” to our consolidated financial statements.
(2)	As of June 30, 2008, we own 133,832,852 shares, or approximately 29% of the voting securities, of GoIndustry. GoIndustry’s common stock is traded on the AIM market of the London Stock Exchange under ticker symbol GOI. See “Note 4 — Ownership Interests in Partner Companies and Goodwill” to our consolidated financial statements.

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Results of Operations

The following summarizes the unaudited selected financial information related to our segments. Each segment includes the results of our consolidated partner companies and records our share of the earnings and losses of partner companies accounted for under the equity method of accounting. The partner companies included within the segments are the same 17 partner companies for 2008 and 2007. Additionally, Commerce360 is included in the other holdings segment from the date it became an equity method partner company beginning in the first quarter of 2008. The method of accounting for any particular partner company may change based on our ownership interest.

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

Segment Information
(in thousands)
										Reconciling Items
										Discontinued
				Other			Total			Operations and								Consolidated
	Core			Holdings			Segment			Dispositions		Corporate			Other			Results
For The Three Months Ended June 30, 2008
Revenues	$	17,581		$	—		$	17,581		$	—	$	—		$	—		$	17,581
Net income (loss)	$	(6,102	)	$	168		$	(5,934	)	$	—	$	(5,370	)	$	(991	)	$	(12,295	)
For The Three Months Ended June 30, 2007
Revenues	$	12,520		$	—		$	12,520		$	—	$	—		$	—		$	12,520
Net income (loss)	$	(4,136	)	$	223		$	(3,913	)	$	141	$	(4,269	)	$	4,061		$	(3,980	)
For The Six Months Ended June 30, 2008
Revenues	$	33,603		$	—		$	33,603		$	—	$	—		$	—		$	33,603
Net income (loss)	$	(12,202	)	$	(934	)	$	(13,136	)	$	—	$	(10,044	)	$	4,332		$	(18,848	)
For The Six Months Ended June 30, 2007
Revenues	$	24,302		$	—		$	24,302		$	—	$	—		$	—		$	24,302
Net income (loss)	$	(9,210	)	$	(545	)	$	(9,755	)	$	634	$	(9,188	)	$	(5,266	)	$	(23,575	)

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For the Three and Six Months Ended June 30, 2008 and 2007

Results of Operations — Core Companies

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
				(in thousands)
Selected data:
Revenues	$	17,581		$	12,520		$	33,603		$	24,302
Cost of revenue		(11,575	)		(10,381	)		(22,946	)		(19,406	)
Selling, general and administrative		(4,113	)		(2,451	)		(7,343	)		(5,533	)
Research and development		(2,771	)		(1,562	)		(4,236	)		(3,130	)
Impairment related and other		(117	)		(54	)		(192	)		(106	)
Operating expenses		(18,576	)		(14,448	)		(34,717	)		(28,175	)
Interest and other		(198	)		182			(200	)		294
Equity loss		(4,909	)		(2,390	)		(10,888	)		(5,631	)
Net loss	$	(6,102	)	$	(4,136	)	$	(12,202	)	$	(9,210	)

Revenues

Revenues increased $5.1 million from $12.5 million in the second quarter 2007 to $17.6 million in the second quarter of 2008. Revenues increased $9.3 million from $24.3 million in the first six months of 2007 to $33.6 million in the first six months of 2008. This revenue increase was due to increased revenues at ICG Commerce from new and existing customers and the consolidation of Vcommerce, from May 1, 2008, which accounted for $1.3 million of the increase.

Operating Expenses

Operating expenses increased $4.1 million, from $14.5 million in the second quarter of 2007 to $18.6 million in the second quarter of 2008. Operating expenses increased $6.5 million, from $28.2 million in the first six months of 2007 to $34.7 million in the first six months in 2008. This operating expense increase was due to increased operating expenses at ICG Commerce to service existing and new customer contracts and the consolidation of Vcommerce, from May 1, 2008, which accounted for $2.6 million of the increase.

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Equity Loss

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

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
				(in thousands)
Selected data:
Total revenues	$	46,920		$	36,843		$	91,324		$	72,014
Total net loss	$	(13,859	)	$	(7,194	)	$	(28,764	)	$	(14,281	)
Our share of total net loss (“equity loss”)	$	(4,909	)	$	(2,390	)	$	(10,888	)	$	(5,631	)

The 2008 revenue improvements over the 2007 periods are due to increased revenue at Metastorm due to its 2007 acquisitions and increased revenue at WhiteFence, Channel Intelligence and Freeborders.

The 2008 net loss increases over the 2007 periods are the result of increased intangible amortization expense at Metastorm related to its second half of 2007 acquisitions and increased expenses at Starcite to integrate its technology platforms.

Accordingly, our share of the net loss increased in 2008 versus 2007.

Results of Operations — Other Holdings Companies

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2008		2007		2008			2007
			(in thousands)
Selected data:
Equity income (loss)	$	168	$	223	$	(934	)	$	(545	)
Net loss	$	168	$	223	$	(934	)	$	(545	)

Equity income (loss) primarily relates to our share of GoIndustry’s and Commerce360’s results.

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Results of Operations — Reconciling Items

Discontinued Operations and Dispositions

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

	Three Months Ended June 30,					Six Months Ended June 30,
	2008		2007			2008		2007
			(in thousands)
Income (loss) from discontinued operations	$	—	$	(220	)	$	—	$	(220	)
Equity income (loss) of partner companies sold		—		361			—		854
Net income (loss)	$	—	$	141		$	—	$	634

The impact to our consolidated results of equity method partner companies in which we have sold our ownership interest during 2007 is also included in the caption “Discontinued Operations and Dispositions” for segment reporting purposes. Equity income relating to these entities in 2007 related to Marketron, which was sold in June 2007, and generated income prior to its sale.

Corporate

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
				(in thousands)
General and administrative	$	(5,717	)	$	(5,305	)	$	(11,149	)	$	(11,338	)
Interest income (expense), net		347			1,036			1,105			2,150
Net loss	$	(5,370	)	$	(4,269	)	$	(10,044	)	$	(9,188	)

General and Administrative

Our general and administrative expenses increased for the three months ended June 30, 2008 versus the comparable 2007 period, primarily due to additional expenses relating to consulting and sponsorship arrangements in the 2008 period. General and administrative expenses decreased for the six months ended June 30, 2008 versus the comparable 2007 period due to lower employee-related expenses partially offset by the increased expenses from consulting and sponsorship arrangements.

Interest Income/Expense

The interest income, net decrease of $0.7 million and $1.0 million for the three and six months ended June 30, 2008, respectively, from the same periods in 2007 is attributable to lower cash balances in the three and six months of 2008 than those in the three and six months of 2007.

Other

	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
				(in thousands)
Corporate other income (loss) (Note 9)	$	(407	)	$	3,586		$	5,446		$	(8,277	)
Corporate income tax benefit (expense)		—			494			—			2,642
Minority interest		(584	)		(19	)		(1,114	)		369
Net income (loss)	$	(991	)	$	4,061		$	4,332		$	(5,266	)

Corporate Other Income (Loss), Net

Other income (loss), net was a loss of $0.4 million in the three months ended June 30, 2008 and income of $3.6 million in the comparable 2007 period. Other loss in the three months ended June 30, 2008 was primarily driven by our Blackboard hedges partially offset by sales of partner companies.

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The gain in the three months ended June 30, 2007 was primarily due to sales of partner companies partially offset by losses on our Blackboard hedges. Other income (loss), net was a gain of $5.4 million in the six months ended June 30, 2008 and a loss of $8.3 million in the comparable period. The gain in the six months ended June 30, 2008 was primarily the result of gains on Blackboard hedges and gains on sales of partner companies. The loss in the six months ended June 30, 2007 was primarily the result of a $10.8 million loss on the repurchase of our senior convertible notes and losses on our Blackboard hedges partially offset by gains on sales of partner companies.

Corporate Income Tax

We recorded a tax benefit of $2.6 million for the 2007 period. See Note 10 to our Consolidated Financial Statements. No benefit was recorded for the loss for the three and six month periods ended June 30, 2008 as realization of this benefit is not considered to be more likely than not.

Critical Accounting Policies

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

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

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

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

Revenue Recognition

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

Vcommerce generates revenue from service fees earned by it in connection with the development and operation of its clients’ e-commerce businesses. Service fee revenue primarily consists of transaction fees, implementation fees, professional services, as well as access/maintenance fees. Vcommerce recognizes revenue from services provided when the following revenue recognition criteria are met: persuasive evidence of an arrangement exists, services have been rendered, the fee is fixed or determined and collectability is reasonably assured. Generally, Vcommerce recognizes revenue over the term of the customer contract.

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Deferred Income Taxes

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

Commitments and Contingencies

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

Recent Accounting Pronouncements

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

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

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

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

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

See Note 2 to our Consolidated Financial Statements.

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

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

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

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

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to equity price risks on the marketable portion of our equity securities. Our public holdings at June 30, 2008 include equity positions in companies in sectors that have experienced significant historical volatility in their stock prices. A 20% adverse change in equity prices, based on a sensitivity analysis of our public holdings as of June 30, 2008, would result in approximately a $17 million decrease in the fair value of our public holdings. Through June 30, 2008, the Company has entered into cashless collar contracts with various expiration dates in 2010 to hedge 1,625,000 shares of its total holdings of 2,187,060 shares of Blackboard common stock at weighted average minimum and maximum prices per share of $24.27 and $56.35, respectively. Each of these contracts limits the Company’s exposure to price declines in the underlying equity securities. Additionally, each of these contracts limits the Company’s maximum benefits from price increases in the underlying equity securities.

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

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

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ITEM 4. Controls and Procedures

Controls and Procedures

Management’s Quarterly Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15e and 15d-15e under the Securities Exchange Act of 1934, as amended) as of the end of the period covered in this Report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered in this Report, our disclosure controls and procedures are effective to provide reasonable assurance that information required to be included in the Company’s periodic SEC reports is recorded, processed, summarized and reported within the time periods specified in the relevant SEC rules and forms.

Inherent Limitations on Effectiveness of Controls

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

Changes in Internal Controls

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

PART II — OTHER INFORMATION

ITEM 1. Legal Proceedings

In May and June 2001, certain of the Company’s present directors, along with the Company, certain of its former directors, certain of its present and former officers and its underwriters, were named as defendants in nine class action complaints filed in the United States District Court for the Southern District of New York. The plaintiffs and the putative classes they seek to represent include present and former stockholders of the Company. The complaints generally allege violations of Sections 11 and 12 of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 10b-5 promulgated under the Exchange Act, based on, among other things, the dissemination of statements allegedly containing material misstatements and/or omissions concerning the commissions received by the underwriters of the initial public offering and follow-on public offering of the Company as well as failure to disclose the existence of purported agreements by the underwriters with some of the purchasers in these offerings to buy additional shares of the Company’s stock subsequently in the open market at pre-determined prices above the initial offering prices. The plaintiffs seek for themselves and the alleged class members an award of damages and litigation costs and expenses. The claims in these cases have been consolidated for pre-trial purposes (together with claims against other issuers and underwriters) before one judge in the Southern District of New York federal court. In April 2002, a consolidated, amended complaint was filed against these defendants which generally alleges the same violations and also refers to alleged misstatements or omissions that relate to the recommendations regarding the Company’s stock by analysts employed by the underwriters. In June and July 2002, defendants, including the Company defendants, filed motions to dismiss plaintiffs’ complaints on numerous grounds. The Company’s motion was denied in its entirety in an opinion dated February 19, 2003. In July 2003, a committee of the Company’s Board of Directors approved a proposed settlement with the plaintiffs in this matter, which was preliminarily approved by the District Court overseeing the litigation in February 2005. A final fairness hearing on the settlement was

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held on April 24, 2006. On December 5, 2006, however, the Second Circuit Court of Appeals reversed the certification of plaintiff classes in six actions related to other issuers that had been designated as test cases with respect to the non-settling defendants in those matters (the “Focus Cases”) and made other rulings that drew into question the legal viability of the claims in the Focus Cases. The Court of Appeals later rejected the plaintiffs’ request that it reconsider that decision. As a result, on June 25, 2007, the District Court approved a stipulation and order terminating the proposed settlement. In addition, the Court has issued an order applying the appellate decision made with respect to the Focus Cases to all other cases, including the consolidated action against the Company (the “Remaining Cases”). On August 14, 2007, the plaintiffs filed an amended “master” complaint containing allegations purportedly common to all defendants in all actions and filed amended complaints containing specific allegations against the six issuer defendants in the Focus Cases. In addition, on September 27, 2007, the plaintiffs again moved to certify classes in each of the Focus Cases. The defendants in the Focus Cases have moved to dismiss the amended complaints. On March 26, 2008, the District Court granted in part and denied in part those defendants’ motion to dismiss. The motion to certify the Focus Cases as class actions remains outstanding. The Court has approved a stipulation extending the time within which the plaintiffs must file amended pleadings containing specific allegations against the other issuer defendants, including the Company, and the time within which those defendants must move, answer or otherwise respond to those specific allegations. Counsel for plaintiffs have indicated an interest in commencing discovery in the Remaining Cases, but the scope and timetable for any such discovery, including discovery relating to the consolidated action against the Company, has not yet been determined.

ITEM 1A. Risk Factors

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

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

None.

ITEM 3. Defaults Upon Senior Securities

None.

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

The Company held its Annual Meeting of Stockholders on June 20, 2008. At this meeting, the stockholders voted in favor of the following items listed and described in the Company’s proxy statement dated April 28, 2008.

(1) Election of Directors	For		Withheld
Class III (term to continue until 2011):
Walter W. Buckley, III		32,570,309		3,944,446
Michael J. Hagan		33,177,644		3,337,111
Philip J. Ringo		33,177,060		3,337,695

The following directors’ terms of office as directors continued after this meeting:

Class I (term to continue until 2009):
David J. Berkman
David K. Downes
Warren V. Musser

Class II (term to continue to 2010):
Thomas A. Decker
Dr. Thomas P. Gerrity
Robert E. Keith, Jr.

(2) Ratification of the appointment of KPMG LLP as the Company’s independent registered public accountant for the fiscal year ending December 31, 2008.

For	Against	Abstain
29,772,480	4,510,084	2,232,191

ITEM 5. Other Information

None.

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ITEM 6. Exhibits

Exhibit Index

Exhibit Number	Document
11.1	Statement Regarding Computation of Per Share Earnings (included herein at Note 11-“Net Income (Loss) per Share” to the Consolidated Financial Statements).
31.1	Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
31.2	Certification of Chief Financial Officer required by Section 302 of the Sarbanes-Oxley Act of 2002, as amended.
32.1	Certification of the Chief Executive Officer required by Section 906 of the Sarbanes-Oxley Act of 2002, as amended.
32.2	Certification of the Chief Financial Officer required by Section 906 of the Sarbanes-Oxley Act of 2002, as amended.

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SIGNATURES

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

Date: August 11, 2008

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

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EX-31.1

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Walter W. Buckley, III, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Internet Capital Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant, and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008

/s/ Walter W. Buckley, III  

Walter W. Buckley, III 

Chief Executive Officer and President 

EX-31.2

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, R. Kirk Morgan, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Internet Capital Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant, and have:

a.	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c.	evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.	disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
b.	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 11, 2008

/s/ R. Kirk Morgan  

R. Kirk Morgan 

Chief Financial Officer 

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002, AS AMENDED

     In connection with the Quarterly Report of Internet Capital Group, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Walter W. Buckley, III, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, as amended, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Walter W. Buckley, III

Walter W. Buckley, III

Chief Executive Officer and President

August 11, 2008

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002, AS AMENDED

     In connection with the Quarterly Report of Internet Capital Group, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2008 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, R. Kirk Morgan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, as amended, that:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ R. Kirk Morgan

R. Kirk Morgan

Chief Financial Officer

August 11, 2008